Miami announced the move on social media. It signed linebacker Junior Sylvestre to fill the empty roster spot. ESPN's Dan Graziano previously reported the QB will undergo reconstructive surgery on a partially torn ACL.
Dolphins head coach Adam Gase told reporters he "absolutely" has confidence Tannehill will be ready to start the 2018 season.
Tannehill originally injured the knee last season during the team's Week 14 victory over the Arizona Cardinals. He opted against surgery but missed the Dolphins' final three games of the regular season and a blowout loss to the Pittsburgh Steelers in the playoffs.
In July, the 29-year-old Texas A&M product tried to downplay any lingering concerns about the knee after taking part in all of the team's offseason activities.
"The knee is really good. It feels really good," Tannehill told reporters. "I haven't had any changes since the spring. I was a full participant in the spring and still going really well. Now we don't have to address that anymore, right? [Laughter.] We're good?"
He suffered the setback during a practice at training camp last week.
The Dolphins moved quickly to find a replacement by signing former Denver Broncos and Chicago Bears starter Jay Cutler, who was set to join Fox Sports' NFL coverage team, out of a short-lived retirement to take over their offense.
Adam H. Beasley of the Miami Herald noted Cutler explained the situation in Miami was too good to pass up.
"A situation like this doesn't come along very often," he said. "I know [head coach] Adam [Gase] very well. I've known him since '06, the first year I came out. I know the system. You're talking about a playoff team with a lot of really, really good football players, a lot of potential. There weren't a lot of opportunities or jobs out there, if they would have came up I would have taken, but this has got to be at the top of the list."
The Dolphins didn't announce a timetable for Tannehill's recovery. He's under contract with the organization through the 2020 campaign.