Wada, 32, is removed from the 40-man roster and becomes a free agent.
Wada signed a two-year, $8.15 million deal on Dec. 14, 2011, but he never pitched for the Orioles after undergoing ligament-reconstructive surgery on his left elbow on May 11, 2012.
The Orioles kept Wada at Triple-A Norfolk this season and sent him to Sarasota in September rather than adding him to their expanded roster.
Wada went 5-6 with a 4.03 ERA in 19 starts with the Tides this year. He gave up two earned runs or fewer in six of his last seven outings, and posted a 1.74 ERA in five August starts.
Wada was 107-61 with a 3.13 ERA and 1,329 strikeouts in 210 career games (207 starts) over nine seasons with the Fukuoka SoftBank Hawks of the Japanese Pacific League. In his last 52 starts, he went 33-13 with a 2.29 ERA. In his final year, he was 16-5 with a 1.51 ERA and four complete games.
The Orioles will attempt to sign Wada to a minor league deal and bring him back to camp next spring.
Next week, the Orioles will announce that they have declined the $3 million option on infielder Alexi Casilla’s contract. Casilla will receive a $200,000 buyout.