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Bottom side Sunderland were relegated from the Premier League last month.
Defoe, 34, joined Sunderland in January 2015 and signed a contract extension in June under former boss Sam Allardyce.
"I wouldn't have allowed a clause to be in there but it is and we have to honour the contract," said Moyes.
"We hope he stays, the supporters hope he says, but it has to be Jermain's decision."
Defoe has scored 15 goals in 35 Premier League appearances this season for the Black Cats.
His excellent form earned him a recall to the England squad in March, after a four-year absence from the national side.
"He has got himself back in the England team, and will want to push to get into the World Cup squad," Moyes added.
"I would imagine he will be thinking that would be hard to do as a Championship player."
Sunderland boss David Moyes says it is "hard to take" that Jermain Defoe has a relegation release clause in his contract that will allow the England striker to leave for free this summer.