Portland signed the 24-year-old restricted free agent last week to a four-year, $32 million offer sheet. The Jazz were expected to match that offer and take ownership of Millsap's new contract even though veteran power forward Carlos Boozer declined to opt out of his contract, leaving Utah with more than $20 million committed to two power forwards next season.
The Jazz are working to deal Boozer, with Miami a possible destination as part of a rumored three-team proposal.
Millsap is one of the better success stories to emerge from the second round of the draft, where the Jazz acquired him in 2006 from Louisiana Tech, the former college of Karl Malone. He averaged a career-high 13.5 points and 8.6 rebounds in 76 games last season. He started half of those games while Boozer was injured and averaged 16.0 points and 10.3 rebounds.
The move by Utah leaves Portland without a free-agent signing this summer. One option for the Blazers is to pull out of the market and hold their cap space until the midseason trading deadline in February, when several teams may be seeking to unload high-salaried talent in hopes of improving their own cap position.