3:09pm: The Rockets confirmed via press release that they've officially waived Harrellson.
2:52pm: The Rockets have waived Josh Harrellson, according to Mark Berman of FOX 26 Houston (via Twitter). Jonathan Feigen of the Houston Chronicle confirms the move, noting that the Rockets had to clear room to sign Carlos Delfino (Twitter link).
Harrellson was acquired by the Rockets in the sign-and-trade deal that sent Marcus Camby to New York shortly after the July moratorium ended. Harrellson was on a non-guaranteed contract, so it won't cost the Rockets anything to drop him.
In his rookie season for the Knicks, Harrellson averaged 4.4 points and 3.9 rebounds in 14.6 minutes over 37 games, including four starts. The 23-year-old big man will be eligible to sign with any team except the Knicks if and when he clears waivers.