It's understood that the Chilean took a pay cut from his 500,000 pounds per week weekly wage.
The 31-year-old scored five goals in 45 appearances for the Reds.
Sanchez joined Red Devils in Arsenal in January 2018, with Henrikh Mkhitaryan heading in the opposite direction.
Alexis moved to the Serie A club on a one-season loan in August 2019 and has made 29 appearances for the San Siro side, scoring four goals.
Part of the statement reads: "Everyone at Manchester United wishes Alexis Sanchez all the best in his future career as he joins Inter Milan on a permanent transfer."
Meanwhile Inter Milan confirmed the permanent signing of the Chilean, the statement reads: "FC Internazionale Milano announce that Alexis Sanchez has joined the Nerazzurri on a free transfer. The Chilean forward has signed a permanent contract with the Club until 30 June 2023."
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