Penny will get a $2 million buyout from the Dodgers. The right-hander is now eligible for free agency.
Penny, 30, went 6-9 with a 6.27 ERA in 17 starts and two relief appearances for L.A. in 2008. He was bothered by shoulder problems for much of the year and went on the disabled list three times: from June 17 to Aug. 8, Aug. 14 to Sept. 10, and Sept. 24 through the end of the season. He was 16-4 with a 3.03 ERA in 2007.
Buster Olney is a senior writer for ESPN The Magazine. The Associated Press contributed to this report.