The move means McElroy can return to the team on injured reserve if he clears waivers.
McElroy, a seventh-round pick in 2011, had been listed consistently as third on the team's depth chart, but Simms took advantage of opportunities afforded him due to injuries that sidelined McElroy in practice and for the final two preseason games.
Simms, an undrafted free agent out of Tennessee and the son of former New York Giants quarterback Phil Simms, completed 74.6 percent of his passes in preseason and finished Thursday night's preseason game by completing 33 of 44 passes for 285 yards. He drew praise from head coach Rex Ryan, offensive coordinator Marty Mornhinweg and quarterback coach David Lee.
McElroy missed the last three preseason games because of a sprained left knee. He was hoping to play in the final game, but he aggravated the injury in practice.
McElroy was thrust into the Jets' quarterback circus last season, when he came off the bench to pull out a win over the Arizona Cardinals. Two weeks later he moved past Tim Tebow on the depth chart, starting for the benched Sanchez. McElroy was sacked 11 times by the San Diego Chargers and suffered a concussion, hiding it from the team for a few days.
Information from ESPN.com's Rich Cimini was used in this report.