The right-hander, 27, is currently on the disabled list with what most likely are season-ending shoulder problems.
"He probably wasn't in a position to pitch the rest of the year and he's a free agent at the end of the season, so it was the obvious roster spot," Royals general manager Dayton Moore told Major League Baseball's website (mlb.com).
Davies had a 1-9 record this year with a 6.75 earned run average in 13 starts. He compiled a 29-44 overall record with the Royals, where he had pitched since 2007.
"I wasn't happy with the way it turned out," Davies said of his release. "I had stretches (of good play), but never to what I thought I could do and what they thought I could do."
(Reporting by Gene Cherry in Raleigh, North Carolina; Editing by Rex Gowar)