Alves refused to return to training after representing Brazil during the recent international break until his wages are paid.
Sao Paulo have now confirmed that they have severed ties with the 38-year-old, who now becomes a free agent.
"We were told by his representatives that Daniel Alves will not come back to Sao Paulo until there is an adjustment in the financial debt that Sao Paulo has with the player," Sao Paulo ‘s football director Carlos Belmonte revealed at a press conference.
"Sao Paulo recognises that debt and last week we made a proposal to try and right it. The proposal was not accepted by the player's representatives. Negotiations will continue.
"We have taken the decision and told this to coach Hernan Crespo that Dani Alves will no longer be at his disposal to play for Sao Paulo.
"We all work for this institution. Nobody is bigger than Sao Paulo Football Club."
Alves returned to his homeland to sign for Sao Paulo in the summer of 2019 after spending 17 years in Europe playing for some of the world’s biggest clubs including Barcelona, Paris Saint Germain and Juventus.
He remains the most decorated footballer of all-time, with 43 trophies to his name.
