The 29-year-old midfielder's deal had been set to run until June 2027, but Portuguese outlet Record reports the two sides mutually agreed to end the arrangement early, closing a four-year spell at the French champions that never came close to matching the promise of his early career.
Bundesliga side Union Berlin have been mentioned as one club exploring a move for the 32-cap Portugal international.
Sanches joined PSG from Lille in 2022 for around €10million, having just won Ligue 1 with the northern club, but his time in the capital was repeatedly disrupted by injury. He suffered 21 separate injury spells during his four years at the club, missing close to 550 days in total, and made just 27 appearances in his one full season before a series of loan spells took him away from Paris entirely.
He spent time on loan at Roma, Benfica and Panathinaikos across the past three seasons without ever forcing his way back into PSG's plans under Luis Enrique.
The move brings a disappointing chapter to a close for a player once considered one of Europe's brightest young talents. Sanches won the Golden Boy award as the continent's best Under-21 player after an explosive breakthrough at Euro 2016, a tournament Portugal went on to win, before Bayern Munich paid Benfica around €35million for his services.
He won four Bundesliga titles in Bavaria before injuries and inconsistency began to define the remainder of his career, taking in spells at Swansea City and Lille before his eventual move to PSG.
Now a free agent, Sanches is understood to have turned down interest from Saudi Arabia and Major League Soccer, along with reported approaches from Ipswich Town and Hull City in England, as he looks to continue his career within Europe's major leagues.
His market value has fallen sharply over the course of his time in Paris, from an estimated €28million when he signed to around €2million now, a reflection of how significantly his injury record has undermined his career trajectory.
Despite the struggles, Sanches remains a decorated figure in the game, with a European Championship winner's medal and four Bundesliga titles among the honours he takes into the next phase of his career, whichever club ultimately decides to take a chance on the 29-year-old.