Following the 2006 NBA Draft, Jerry West traded Shane Battier to the Houston Rockets for first round pick, Rudy Gay of the University of Connecticut, and Stromile Swift. Before the 2006-07 season, the Grizzlies suffered a crippling blow when Gasol broke his left foot while playing for Spain in the World Championships. The Grizzlies started the season 5-17 without Gasol, and then went 1-7 while he was limited to about 25 minutes per game. At that point, Fratello was fired and replaced by Tony Barone, Sr. as interim coach. Barone was the team's player personnel director and had never coached an NBA game though he had coached at the collegiate level for both Creighton and Texas A&M being named coach of the year in their conferences three times during his tenure. Grizzlies finished the 2006-07 season with the league's worst 22-60 record, and Jerry West announced resignation from his position as the team's general manager shortly after end of the regular season. The team also hired highly touted Phoenix Suns assistant Marc Iavaroni to be the team's new head coach. Despite their last place finish, the Grizzlies, who held the best chance of landing the first pick in a draft, ended up with the fourth pick in the 2007 NBA Draft. With this Pick, the Grizzlies select Mike Conley, Jr. A guard from Ohio State. As of 2008, the Grizzlies are the only team representing Memphis, Tennessee in the United States four major sports leagues (NBA, NFL, MLB and NHL).

On June 18, 2007, the Grizzlies named former Boston Celtics GM Chris Wallace as the team's General Manager and Vice President of Basketball Operations, replacing the retired West. A few days later, the Grizzlies hired former Philadelphia 76ers and Orlando Magic head coach Johnny Davis, longtime NBA assistant coach Gordon Chiesa, and the head coach of the 2007 NBA Development League champion Dakota Wizards, David Joerger, as the team's new assistant coaches. Gene Bartow, a Memphis basketball legend, was named the Grizzlies' President of Basketball Operations on August 16, 2008 On February 1, 2008, Gasol was traded to the Los Angeles Lakers for Kwame Brown, Javaris Crittenton, Aaron McKie, rights to Marc Gasol (Pau's younger brother), and 2008 and 2010 first round draft picks.