Pettitte's agent, Randy Hendricks, told the Associated Press in an e-mail message that the left-hander would not be able to reach a decision by Wednesday and will declare free agency instead.
"I have spoken with Brian Cashman, who has reiterated what Hank Steinbrenner said about the Yankees wanting to give Andy all the time he needs to decide about next season," Hendricks told the AP. "Accordingly, we are declining to exercise the option for 2008 and Andy will declare free agency in order to free up a roster spot for the Yankees.
"If Andy decides to play, I am confident we can reach an agreement with the Yankees within 24 hours. The only options, as Andy has stated, are the Yankees or retirement. He appreciates the Yankees' willingness to give him the time he feels he needs. I do not expect him to make a decision for quite some time."
"Obviously, we want Andy to stay with the Yanks and pitch for us in '08," Cashman told reporters from the general manager meetings in Orlando, Fla. "In fact, I'd say I need him to. He's an important piece for us. ... We're hopeful that at some point, the marriage of the Pettittes and the Yankees can continue."
Pettitte, 35, was 15-9 with a 4.05 ERA in 34 starts (36 appearances) this season for the Yankees, agreeing to put off retirement when he was wooed back for one more season at a dinner honoring members of the 1996 Yankees, including manager Joe Torre and shortstop Derek Jeter.
Slowed by injury woes during his three years with the Houston Astros beginning in 2004, Pettitte spoke often about being surprised by how strong and effective his pitching arm felt late in the season.
He was 11-3 after the All-Star break and turned in the Yankees' most effective start of the postseason, pitching 6 1/3 scoreless innings in Game 2 of the AL Division Series against the Cleveland Indians in one of the grittier starts of his career.
Yet Pettitte said repeatedly he was unable to forecast if he'd rev it up again for 2008.
"I'm just not real sure," Pettitte told MLB.com late in the season. "I hate it that I can't answer everybody's questions. I just need to get to the offseason and think about what I feel like I should be doing as a father and as a husband, then as a baseball player, what I feel like would be right for my family. That's what's going to go into it."
Pettitte's $16 million option for next season was inserted as a general courtesy as part of his contract for returning to New York in December, insisted upon by the left-hander so he would not feel pressure to fulfill a two-year obligation.
"Last year, he was planning on retiring, and we did a full-court press on convincing him not to," Cashman said last week. "Then he got his blood pumping, but that took time to get him going and get him ready, to get up to go play again, because I think he was married to shutting it down.
"That was real last year. One of the reasons we set up the process the way we did this year was so that he could control what he wants to do. He's basically got to make the decision."
The Yankees had expressed hope that Pettitte would trigger the option and re-join them; he still could sign a new contract to return if he decides to do so. Pettitte told a Houston television station last week that he has ruled out the idea of signing with another team in 2008; he will either pitch for the Yankees or retire.
"The New York Yankees committed an awful lot of money to me and put it in my hands, gave me a player option and trusted me with that option," Pettitte told KRIV-TV. "It probably wouldn't be real honorable for me not to do anything other than if I shut it down, shut it down or go back and play for the New York Yankees."
Pettitte has a career record of 201-113 in 403 Major League appearances (393 starts) dating back to his debut in 1995 with New York. He owns 164 wins as a Yankee, tying Mel Stottlemyre for sixth place on the club's all-time list, and his 14 career postseason victories are tied with Tom Glavine for second place on baseball's all-time list.
Bryan Hoch is a reporter for MLB.com. This story was not subject to the approval of Major League Baseball or its clubs.