The right-hander broke the news during a Thursday morning radio interview with WEEI-850 AM and then spoke with the rest of the media following the team's workout.
"It's disappointing," said Schilling. "But I said earlier, that's the way it works sometimes. It's a business, and I get that. I woke up, the sun came up today and I was getting after it today."
Schilling and Epstein had their brief meeting on Wednesday.
"We kind of met yesterday just to wrap up negotiations," said Epstein. "We have a tremendous amount of respect for Curt -- always have, always will. It doesn't change how we feel about him, it doesn't change our expectations for him, it doesn't change his place in the organization. It simply wasn't the right time for us to enter into a guaranteed agreement for 2008."
Age was clearly the cause for the impasse. Still, Epstein expressed hope that this won't be Schilling's final season in Boston.
"Well, there's a bit of a sliding scale based on age. The deeper you go into your career, I think the more hesitant the club might be to guarantee salary years in advance," said Epstein. "Curt is going to be 41. At that age, we get a little more conservative. It doesn't mean we don't want him back. I have all the confidence in the world that if Curt wants to pitch in 2008 and he's still pitching effectively, as I expect he will, that we'll find a way to keep him in a Red Sox uniform.
"It doesn't make sense from a business standpoint right now to guarantee that kind of money a year in advance for a 41-year-old. He's our No. 1, he's our Opening Day starter, we couldn't be happier about that."
Ownership, which was kept in the loop during the negotiations, also still is optimistic that a resolution could be worked out for 2008.
"My feeling is that Curt Schilling will end his career as a Red Sox player," said Red Sox chairman Tom Werner. "He's very proud, and I think if he pitches as well as he expects to pitch this year, of course we'll make a deal for him for next year.
"Somebody said, 'Are you panicking that he is going to file for free agency?' Not at all, because I believe we have shown respect for Curt and we are going to sit down with him at some point and work out a contract if he wants to pitch next year. We're just not going to do it in February."
Schilling, who will make a base salary of $13 million this season, indicated in recent weeks that he'd be looking for roughly the same figure in an extension. He said that financial parameters were discussed during some of his informal discussions with the team in recent weeks.
"Oh, absolutely," said Schilling. "That was the first discussion we had. And it was something I was under the impression was fine for everybody and then there was a change in direction."
Still, Epstein was comfortable with the way things ended between the sides.
"Very professional," said Epstein. "He understood. I think he's disappointed, but Curt said, and I believe him, that it won't affect his preparation or his performance one bit. He's never been driven by contracts. That's not what he's all about. Despite the fact he's going to file for free agency, we'll have an opportunity to talk."
As recently as a month ago, Schilling was supposed to be a retired player in 2008. But Schilling, after discussions with his wife and children, announced in late January that he had changed his mind. Shortly thereafter, he expressed hope that he could work out a deal with the Red Sox, but wanted it to be done by Opening Day.
Manager Terry Francona, who has been around Schilling longer than anyone else connected with the Red Sox, did not seem all that concerned with Thursday's news.
"He was also going to retire," quipped Francona. "You know what I'm saying. Things change. It's the business side that I'm glad I don't have to deal with. The thing that I am thankful for or grateful for is, regardless of whether he's signed for 10 years or one month, he will pitch like he's always pitched and he'll give you everything he has."
Schilling has been traded five times in his career, but has never been a free agent.
While vowing that he won't be distracted, Schilling also said his contract status won't alter his motivation.
"The three best years of my career, '97, 2001 and 2004, were all first year of multiyear contracts," said Schilling. "I don't pitch for contracts. I pitch for the reasons that I love playing the game."
The Red Sox acquired the 40-year-old right-hander from Arizona in a trade following the 2003 season. He was immediately signed to a three-year contract through 2006 with a vesting option for this season.
Schilling was 15-7 with a 3.97 ERA in 2006.
While he's certainly become entrenched in the Boston community since joining the Red Sox, Schilling indicates that his current team won't get any special treatment when he becomes a free agent.
"I had a long talk with [Schilling's wife] Shonda last night, and if it doesn't work out, then the family is OK with that," said Schilling.