Collins hurt his neck while trying to make a tackle in the Packers' Sept. 18 victory at Carolina, an injury that ended his season and required surgery. Agent Alan Herman said Collins has not decided whether he will attempt to play for another team.
Packers general manager Ted Thompson said the team wasn't comfortable putting Collins back on the field.
"From the beginning of this process, we have taken our time and sought numerous medical opinions while maintaining consistent dialogue with Nick," Thompson said. "In the end, we were not comfortable clearing him to play again. As with all of our players, Nick is a member of our family and we thought of him that way as we came to this conclusion."
Collins, who played all seven of his NFL seasons in Green Bay, thanked Packers fans on his Twitter account.
A second-round pick in the 2005 NFL draft, Collins started 95 regular-season games, missing only three over the first six years of his career. He had 21 career interceptions with the Packers, returning four for touchdowns. He was named to the Pro Bowl three straight seasons and was named a second-team All-Pro after the 2010 season.
He returned an interception 37 yards for a touchdown in the Packers' victory over the Pittsburgh Steelers in the 2011 Super Bowl.
"Nick is a part of our core, and this is a very difficult day for all Packers," Thompson said. "Making this kind of decision is never easy, especially when it involves someone like Nick Collins. He has meant so much to the community, his teammates and the organization. He is a good man and will always be part of the Packers family."
It was the second tough decision the Packers have made this week after releasing veteran left tackle Chad Clifton on Tuesday. But parting with Collins wasn't entirely unexpected. Packers coach Mike McCarthy expressed concerns at last month's NFL meetings.
"If Nick's able to come back, that's a great boost for us, but the personal side of it is the concern," McCarthy told reporters. "It's an injury that hopefully the surgery has worked and everything's back in place. But once again you're talking about a risk assessment. That makes me a little nervous."
McCarthy said at the time that while the reports about Collins' surgery were positive, that wasn't necessarily going to be enough for the Packers to put him back on the field.
"To have Nick Collins back on the practice field and playing games would be huge, but this is more than football," McCarthy said. "Nick's a family man, he's a father, that's no fun standing over someone like that. I don't think any coach wants to see one of their players go through that."
The move is unlikely to change the Packers' strategy going into the NFL draft, which begins with the first round Thursday night and continues through Saturday. Given the concerns about Collins, the Packers were likely to look for safety help either way -- although Thompson is adamant that immediate team needs won't compel the Packers to reach for a player.