West, 34, was scheduled to make $12.6 million in 2015-16, the final season of a three-year, $36.6 million deal he signed with Indiana in 2013.
Center Roy Hibbert also has a player option in his contract for next season, but has yet to make a decision.
According to the report, West is not expected to re-sign with the team and is looking for a new fit.
West averaged 11.7 points per game, his lowest since the 2004-05 season, to go along with 6.8 rebounds and 2.8 assists for the Pacers, who missed the playoffs for the first time in four seasons.
West played 66 games, missing 15 games at the beginning of the season due to a right ankle injury.
In 12 NBA seasons, West, a two-time All-Star, has averaged 15.5 points and 7.2 rebounds in his career.
- Scooby Axson