Iwakuma pitched just six games for Seattle this season, going 0-2 with a 4.35 ERA before being placed on the disabled list in early May. He attempted to come back all year, but was finally shut down two weeks ago when it became apparent he still wasn't able to throw competitively.
The Mariners have a $10 million option on the 36-year-old's contract for next season, or they can offer him a $1 million buyout and let him enter free agency.
Iwakuma has been one of Seattle's most-consistent starters over the past six years, compiling a 63-39 record and 3.42 ERA in 150 games, including 136 starts.
He finished third in the American League Cy Young Award voting in 2013 after going 14-6 with a 2.66 ERA and he was voted the Mariners Pitcher of the Year by the Seattle Baseball Writers Association of America both that season and in 2016, when he finished 16-12 with a 4.12 ERA.
Paxton to start Sunday's finale
Although the Mariners are out of the playoff picture, they've decided to allow left-hander James Paxton to start Sunday's 12:07 p.m. PT season finale against the Angels.
Paxton is 12-5 with a 3.12 ERA in 23 starts, but he has pitched just three times since returning from a month-long stint on the disabled list with a strained pectoral muscle.
"They gave me the option and I decided my body feels great and my innings aren't an issue, so I want to run it out there one more time," Paxton said. "The more innings I can get, the better. It gives me one more game to go out there and feel good about where I'm at going into next season."
Paxton threw 82 pitches in 5 1/3 innings in his last outing, a 6-3 win in Oakland, and will likely throw in that range again Sunday.
"We had a good talk and he feels like his mechanics and timing are really coming along and he just wants to go out and pitch one more time and finish out the season," manager Scott Servais said. "I certainly respect him wanting to feel good about going out there. It'll be on a limited basis. We're not going to run him out there for 110 pitches, but hopefully he gives us a competitive five innings and we go from there."
Greg Johns has covered the Mariners since 1997, and for MLB.com since 2011. Follow him on Twitter @GregJohnsMLB. This story was not subject to the approval of Major League Baseball or its clubs.