- Tania Ganguli, ESPN Houston Texans reporter
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Daniels had one year left on a three-year deal worth about $15 million. He would have counted for $6.25 million against the salary cap for the 2014 season.
By releasing Daniels, the Texans save $4.5 million against the cap. The Texans also released cornerback Brice McCain on Tuesday.
Graham served as Daniels' backup last season but started in his place after Daniels suffered a nondisplaced fibula fracture in Week 5.
The 31-year-old Daniels, who was drafted by the Texans in 2006, was one of quarterback Matt Schaub's favorite targets. He has 385 career receptions, 4,617 yards and 29 touchdowns -- which all rank second in franchise history.
Daniels' release was earlier reported by the Houston Chronicle.
The Houston Texans released Owen Daniels on Tuesday, one day after the veteran tight end said he'd be willing to restructure his contract in order to stay with the team.