Oher's approaching a year in concussion protocol and there now isn't a timeline for his return, leaving his career in serious jeopardy.
Oher signed a three-year, $21.6 million contract extension with the Panthers last summer.
"The most important thing is his health", head coach Ron Rivera told the team's official website.
The #Panthers have released veteran OL Michael Oher with a failed physical designation.
In an incident that took place on April 14, Oher was accused of assaulting an Uber driver in Nashville after requesting a ride to a comedy club.
On Thursday, Rivera said Michael's health always came first, especially when making such a decision.
Oher is most notably known as the inspiration for the Academy Award- nominated "The Blind Side" movie.
Oher played just three games last season in September because of a concussion he received and nearly a year later, he has yet to be cleared to play.
It's the first personnel move under Panthers new interim general manager Marty Hurney, who was hired on Wednesday. He started 16 games during the regular season and three postseason games in his first year with the franchise.
Oher was a member of the 2012 Ravens Super Bowl team.
The former Pro Bowl offensive lineman joined the Panthers in 2015 after brief stint with the Tennessee Titans.