Jadon Sancho confirmed his departure from Chelsea on Tuesday ahead of his return to Manchester United following the end of his season-long loan at Stamford Bridge.
Chelsea failed to agree personal terms on a permanent deal with the former England international, a source told ESPN.
Chelsea will be forced to pay a £5 million ($6.7m) penalty to break their initial loan agreement with United, which contained an obligation to buy Sancho for a fee of around £25m.
The source added that Chelsea asked Sancho to accept a significant cut to his salary -- in excess of £300k-a-week -- to bring him into line with the wage structure at Stamford Bridge but talks broke down.
"Grateful for the experience," Sancho wrote on social media site X. "Big love to everyone at Chelsea who made me feel at home -- teammates, staff and the fans. Wishing the club all the best moving forward. Truly grateful, Thank you Blues."
Sancho made 41 appearances for Chelsea across all competitions, registering five goals and 10 assists. The 25-year-old scored the third goal in Chelsea's 4-1 win over Real Betis in the UEFA Conference League final which secured the club's first trophy under Todd Boehly and Clearlake Capital's ownership.
The winger is now expected to assess his options with several European clubs having shown an interest previously in signing Sancho.
Sancho is contracted to Chelsea until June 30 but the club are set to depart London next week for the United States ahead of the Club World Cup.
Their first match is against LAFC on June 16 in Atlanta.