The Patriots released the six-year veteran, who was tied for second on the team with three interceptions last season. He was due to make a base salary of $2.8 million in 2011.
"Tough release there with James Sanders," Patriots coach Bill Belichick said Monday in a conference call. "James has been a good guy to have on this team. A hardworking kid. ... He's been a really solid team player for us but we just, part of the move, needed to release people."
Sanders was a fourth-round draft pick from Fresno State in 2005 who has totaled 300 tackles, eight interceptions, two forced fumbles and two fumble recoveries in his career. He has also played in 10 postseason games, starting seven.
Atlanta's general manager Thomas Dimitroff used to work for New England.
Information from The Associated Press contributed to this report.