The 31-year old Vancouver-born midfielder has been let go after two years with TFC but Nelsen says it was not an easy decision.
"It is obviously really unfortunate," Nelsen told MLSsoccer.com. "We really like Terry.
"He is a guy who gives you everything with his heart and soul. It was just one of those ones that we had to make a really tough decision on.
"We just have better options in the young guys that have progressed further on. Jeremy (Hall) has become even more accustomed to the position and Matias Laba has come in and played well. It was more that the young guys have progressed on really well.
"As you have seen in the last couple of games, we have kind of bossed that central midfield with those two guys."