Fanene, 30, was one of the Patriots' most expensive offseason additions in free agency, with the team signing him to a three-year, $9.85 million contract. He received a $3.85 million signing bonus.
"It just didn't work out," coach Bill Belichick said in a conference call Tuesday afternoon. "Don't really think I have much more to add than that, it just didn't work out."
The former Cincinnati Bengals defensive end has had some problems with an injured knee. According to a source, he might need arthroscopic surgery later in the week.
He recorded a career-high 6.5 sacks last season, playing in all 16 games (two starts).
The Patriots hoped that Fanene would rotate with Vince Wilfork and Kyle Love as a strong 1-2-3 punch in the middle of a revamped defense. Early in training camp, Fanene was one of the tougher linemen to block, faring well in one-on-one drills as an interior penetrator.
Brace, in particular, played well in Monday night's preseason game against the Eagles, perhaps giving the Patriots more comfort in moving on from Fanene, who had also been banged up in offseason camps.
Wilfork and Love appear to be locked in as the starting tandem, so Brace and Deaderick now get bumped up the depth chart.