The five-time All-Star becomes the second high-profile player to decide to sit out after Washington Nationals first baseman Ryan Zimmerman opted out last Monday.
"We have been in constant contact with David and we understand how much this deliberation weighed on him and his family," the Dodgers said in a statement expressing their support. "We know he'll be rooting hard for the club every day and look forward to having him back with us in 2021."
Price was scheduled to make $16 million this campaign before the coronavirus pandemic hit. He's forfeiting $11.9 million by opting out, according to Brodie Brazil of NBC Sports California.
The 34-year-old pitcher, along with 2018 AL MVP Mookie Betts, landed with the Dodgers in February following a blockbuster trade with the Boston Red Sox.
Price posted a 4.28 ERA across 22 starts with the Red Sox in 2019.
Back in May, the former Cy Young winner decided to give $1,000 to every minor leaguer who wasn't on the Dodgers' 40-man roster in June.