The 27-year-old departs the Parc des Princes after a four-year spell in the French capital, having joined from Borussia Dortmund in a €32m (£27.5m) deal in the summer of 2019.
Diallo contributed four assists from 75 games as a centre-back or left-back, but he lost his place in the PSG setup following the arrivals of Nuno Mendes and Sergio Ramos.
As a result, the Senegal international spent the 2022-23 season on loan with RB Leipzig, but he played just 15 times for Die Roten Bullen in all competitions, scoring once.
Upon his return to PSG, Diallo was relegated to the "undesirables" group of players who did not fit into Luis Enrique's plans, and the French champions will receive €15m (£12.9m) for his sale.
The defender paid a brief tribute to the club upon his exit, telling psg.fr: "Out of sight, but close to my heart. I'll always be a Parisian and grateful to have worn this shirt."
Diallo won three Ligue 1 titles, three Trophee des Champions, two Coupe de Frances and one Coupe de la Ligue with PSG and follows Neymar to the Middle East after the winger's €90m (£77.3m) move to Al-Hilal was confirmed earlier on Tuesday.
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