NBA Coach of the Year George Karl won't return to the Denver Nuggets next season, the team announced Thursday.
Karl posted a thank you to Nuggets fans through his Twitter account.
"I want to thank Nuggets fans for their support over the past 8 yrs. The karma on the street was incredible. Denver will always be home," he tweeted.Karl, 62, was heading into the final year of a contract that paid him $4.5 million annually. Denver had the option to pick up a three-year extension on his contract, but Karl was receptive to the idea of modifying the terms and length of the extension, a source with knowledge of the situation told ESPNLosAngeles.com's Ramona Shelburne.
The source, though, said the Nuggets balked at the request and decided formally to part ways with Karl instead of retaining him under uncomfortable circumstances.
A source with knowledge of the situation told Shelburne one of the primary issues the Nuggets had with Karl was his reluctance to play young center JaVale McGee, whom they had signed to a four-year, $44 million extension in the offseason.
The move allows the Nuggets to change direction with a new coach and general manager, and gives Karl time to look for another opportunity while there are still openings.
Karl's agent, Warren LeGarie, told ESPN: "This was not the ideal situation. Obviously, George would've preferred to stay on. But I can't praise [Nuggets team president] Josh Kroenke enough for the way in which he handled a really difficult situation for both sides. He was always straightforward and honest every step of the way, and was very clear about what they were prepared and not prepared to do."
Added Kroenke in a statement released Thursday: "George has been an instrumental part of our success over the past decade, and we appreciate everything he did to keep us among the top teams in the Western Conference. He is a Hall of Fame coach whose legacy in Denver will last for years to come. George is a legend in the game of basketball and I could not have more respect for him as a person and coach."
Karl, meanwhile, is very intrigued by the open Los Angeles Clippers job, two sources close to the coach told Shelburne.
The feeling is mutual with the Clippers, who had preliminary conversations with Denver about Karl last week. A source with knowledge of the Clippers' thinking said he will be a candidate who will be "strongly considered." The Clippers have yet to speak formally with Karl, but there have been already discussions with his representative, sources said.
Sources also have told ESPN that Pacers associate coach Brian Shaw is expected to meet with the Clippers as soon as Monday.
Meanwhile, USA Today reported that the Memphis Grizzlies -- still deciding whether or not to bring back Lionel Hollins -- discussed their job with Karl soon after he was let go Thursday. The Grizzlies, sources said, have Memphis assistant coach Dave Joerger and Karl at the top of their list should they part ways with Hollins.
One of the newest members of the Grizzlies' front office -- Stu Lash -- worked with Karl in Denver.
Sources said the Nuggets, furthermore, have interest in pursuing Hollins, who just led the Grizzlies to 56 wins and the first conference finals berth in franchise history. The Clippers were scheduled to meet with Hollins on Thursday afternoon.
The Brooklyn Nets also are searching for a new coach, but a league source told ESPNNewYork.com's Mike Mazzeo that it's "highly unlikely" the team will pursue Karl for its vacancy.
As for the Clippers, one of the reasons the team's search to replace Vinny Del Negro has moved reasonably slowly, according to one source, is that it was hoping Karl's future with the Nuggets would be resolved quickly in the wake of Denver general manager Masai Ujiri's move to the Toronto Raptors.
It is not yet known if the Raptors, with Ujiri in charge, will make a play for Karl. The coach Ujiri inherited -- Dwane Casey -- is entering the final year of his contract.
Ujiri, the NBA's Executive of the Year, left the Nuggets to become the Raptors' executive vice president of basketball operations.
Nuggets forward Kenneth Faried reacted with shock on Twitter to the news of Karl's departure.
He tweeted: "So we lost a GM now a coach what's next!?"
Ty Lawson, who led the Nuggets in scoring with 16.7 points per game, was equally shocked.
"All of this is crazy and unexpected, don't know what to say," he said in a text to The Denver Post.
Karl was named the NBA's top coach after leading the Nuggets, who had the third youngest roster in the NBA, to a 57-win season.
Karl had jokingly said during the season that he did not want to win the NBA's Coach of the Year award because of its long history of creating outsized expectations for teams that ultimately resulted in the coach getting fired within a year or two of winning the award.
The Nuggets were the third seed in the Western Conference but were ousted in the first round by the Golden State Warriors. It was the eighth time in Karl's nine playoff appearances with Denver that the Nuggets had been ousted in the first round.
Karl worked wonders this season with a lineup that lacked an All-Star, was beset by injuries to several starters and twisted its way through a brutal early-season schedule in which 22 of the team's first 32 games were on the road.
Relying on an old-school, up-tempo offense and a deep bench that wore out opponents, especially at altitude, the Nuggets led the league in scoring, fast-break production and points in the paint with nary a dominant scorer.
They went an NBA-best 38-3 at home, winning their last 23 games at the Pepsi Center in the regular season and going 24-4 after the All-Star break.
A two-time cancer survivor, Karl changed his coaching style after returning from throat cancer in 2010. He delegated more duties at practice, relying on his assistant coaches to do much of the teaching.
Karl is 1,131-756 in his 25 seasons as head coach and 80-105 in the playoffs. In his time in Denver, Karl is 423-257 in the regular season with three division titles and 21-39 in the playoffs. Karl's 21 straight non-losing seasons tie Phil Jackson for the longest streak in league history.
Information from ESPNLosAngeles.com's Ramona Shelburne, ESPN.com's Marc Stein, ESPNNewYork.com's Mike Mazzeo and The Associated Press was used in this report.

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