The British & Irish No 10 candidate is reported to be heading to France to join big spending Racing Metro 92 - and potentially link up with Welsh duo Jamie Roberts and Dan Lydiate.
"The Irish Rugby Football Union has been informed that Johnny Sexton will not be renewing his contract to remain playing full time in Ireland from the end of this season," said IRFU chief executive Phillip Browne in an official statement.
"We are very disappointed, as we know the Irish rugby public will be, that Johnny Sexton will not be playing his rugby full time in Ireland from next season. Johnny is a major talent and his full time presence in Ireland will be missed, particularly by Leinster.
"We wish Johnny continued success with his career and he will receive all the support he needs over the next number of weeks in what we know was a very difficult decision for him.
"While we remained in the fight right up until the last possible moment to keep Johnny in Ireland with a very strong offer, ultimately, following negotiations with the player's agent, we had no option but to take the decision that it would not be in the best interest of Irish rugby to chase the reported financial incentives being offered.
"The IRFU has made a commitment to, and been largely successful in, keeping as many Irish players as possible playing full time in Ireland. However, we have always recognised that some of our players will be targeted by overseas clubs with offers which, quite simply, are not within our orbit.
"While Johnny has made the decision to move on to a new club, the IRFU is fully committed, together with the provinces, to maintaining its programme of nurturing and retaining Irish rugby talent. We feel that the benefits of the careful and considered management of those players will allow us to maintain this policy."
Sexton has helped Leinster win the Heineken Cup three times in the past four seasons and has overtaken Ronan O'Gara as Declan Kidney's No 1 choice outside half in the Irish national team.
"Naturally, I'm disappointed. I've really enjoyed Johnny's input over the last few years and he has added tremendous value to the Leinster environment both on and off the field," said Leinster coach Joe Schmidt.
"The offer he has received is exceptional, even by French standards, but I know that it was still a tough decision for him."