Hollins, who came to Cleveland in a 2010 trade with Minnesota, averaged 3.7 points and 2.3 rebounds in 15.1 minutes per game. The 7-footer made seven starts and played in 24 games this season.
Hollins' release comes one day after Thompson scored a season-high 27 points and grabbed 12 rebounds in his second career start at center in a 105-100 win over the New Jersey Nets. Hollins was active but did not play.
Hollins made 16 starts for the Cavs last season. The 27-year-old was drafted in the second round in 2006 by Charlotte. He has also played for Dallas.
The Cavaliers play in Atlanta on Wednesday.