Per ESPN's Adrian Wojnarowski, the Blazers are using the stretch provision to waive Nicholson in an effort to spread out his salary-cap hit.
The Trail Blazers acquired Nicholson from the Nets on July 25 in exchange for Allen Crabbe, though Wojnarowski reported at the time of the deal the plan was for Portland to waive him.
A first-round pick by the Orlando Magic in 2012, Nicholson signed a four-year deal with the Washington Wizards last summer. He appeared in 28 games for the Wizards before being dealt to the Nets in February.
Nicholson is still owed $19.9 million from the deal he signed last year, per Spotrac.
Under terms of the NBA's stretch provision, Nicholson's remaining guaranteed salary can be paid out "over twice the number of remaining years, plus one."
Portland started the offseason with a messy salary-cap situation that featured approximately $123.5 million on the books for next season, per Spotrac. The NBA salary cap for the 2017-18 season is set at $99.093 million.
Nicholson averaged a career-low 2.6 points and 1.6 rebounds in 38 games last season.