Lloyd was due a $3 million roster bonus this weekend, and the expectation had been that the club would not pick it up. A source said the sides recently entered into talks on a restructured contract, although it's now apparent they could not strike a deal.
Lloyd was scheduled to earn a base salary of $1.9 million in 2013, which would have come with a salary cap charge of $4.9 million. The Patriots were open to keeping Lloyd with a reduced salary.
One of the team's starting receivers last season, Lloyd played in 84.8 percent of the offensive snaps and finished with 74 receptions for 911 yards and four touchdowns. It was Lloyd's first season in New England.
The Boston Herald earlier reported news of Lloyd's impending release.