The terms of the deal are for the Eagles to receive a second-round pick, 37th overall, in this month's NFL draft, and either a third- or fourth-round pick next year.
The team announced the deal Sunday night.
``Donovan McNabb was more than a franchise quarterback for this team,'' Eagles chairman Jeffrey Lurie said. ``He truly embodied all of the attributes of a great quarterback and of a great person. He has been an excellent representative of this organization and the entire National Football League both on and off the field. I look forward to honoring him as one of the greatest Eagles of all-time and hopefully see him enshrined in the Pro Football Hall of Fame in Canton one day.''
McNabb, a six-time Pro Bowl quarterback, led the Eagles to five NFC championship games and one Super Bowl in 11 seasons in Philadelphia. His failure to lead the team to its first NFL championship since 1960 plus the emergence of Kevin Kolb made him expendable.
Kolb, who has started two games in three seasons, becomes the starter. Michael Vick is the backup.
``This was a very tough decision,'' coach Andy Reid said. ``Donovan McNabb represented everything a football player could be during his 11 seasons in Philadelphia. He carried this organization to new heights and set a high standard of excellence both on and off the field. We thank him for everything he did for this football team and for this city.''
McNabb threw for 3,553 yards and 22 touchdowns with 10 interceptions in 14 games last season, leading the Eagles to the playoffs. His passer rating of 92.9 was the third-highest in his career.
But McNabb played poorly in a loss to Dallas in Week 17 that cost Philadelphia a division title and a first-round bye. He also struggled in a loss to the Cowboys the following week in the wild-card game.
Reid said immediately after the season that McNabb would return in 2010. Reid repeated that several times throughout the offseason until acknowledging last month the team was listening to offers for all three of its QBs.
``Donovan is the ultimate professional,'' Eagles president Joe Banner said. ``He has an incredible work ethic and has been an integral part of our success. Over the years, Donovan has always carried himself with a great deal of dignity. He's an excellent role model for young men and women from across the region. In my mind, he'll always be remembered as one of the greatest Eagles of all time.''
The Associated Press contributed to this report