Redden, 35, had been placed on waivers Wednesday, and once he cleared waivers Thursday, the team was able to buy out the remaining two years on the six-year, $39 million contract Redden signed in 2008.
The move makes Redden an unrestricted free agent, able to sign with any other team.
Redden had five goals and 40 points in 156 regular-season games with the Rangers, but had spent the last two seasons playing for the club's American Hockey League affiliate, the Connecticut Whale. Redden had not played this season.
In 13 NHL seasons with the Ottawa Senators and Rangers, Redden had 450 points in 994 regular-season games. A two-time NHL All-Star, Redden has scored at least 30 points nine times.
Redden was one of two big-name players who reportedly cleared waivers Thursday with the intention of having their contract bought out. Scott Gomez reportedly will have the last two years of his contract bought out by the Montreal Canadiens.
The NHL and the NHL Players' Association on Tuesday agreed on a change in compliance buyout rules, allowing teams to buy out player contracts prior to Saturday.
In the new Collective Bargaining Agreement agreed to recently by the NHL and the NHLPA, clubs were permitted two "compliance" buyouts to take place during the 2013 and/or 2014 offseasons in order to ease the transition to a lower salary cap.
The new agreement allows teams to use one of those compliance buyouts prior to the start of this season. However, the player's full salary for the 2012-13 season will count against the team's cap.