McGee was kicked off the team because of academic and team guideline violations.
"Our coaching and support staff tried to make this work out, but we felt that there were some basic standard operating procedures that were not being met," Crean said in a statement.
The 6-foot-7 McGee played in 17 games during his freshman season, averaging 1.5 points and 1 rebound.
McGee's dismissal comes days after Crean signed 7-foot, 255-pound center Tijan Jobe from Olney Central junior college in Illinois. Jobe, who averaged 4.0 points and 4.0 rebounds last season, will be able to play for the Hoosiers this year.
Jobe is from Gambia and chose Indiana over UAB, Auburn and Nebraska.
He is the sixth player Crean has signed to scholarship offers to play for the Hoosiers next season since becoming coach last month. Others are forward Tom Pritchard and guards Verdell Jones III, Matt Roth, Devan Dumes and Nick Williams.
The only returning players remaining on the IU roster are guard Jordan Crawford, forward Kyle Taber and walk-on guard Brett Finkelmeier.