McAlister has been hugely impressive during his time with the Edgeley Park outfit and the club had hoped he would sign an extension to his contract.
However, with the NZRU not selecting players playing outside of New Zealand for the All Blacks, the 25-year-old has instead decided to try and resurrect his international career in the lead up to the 2011 World Cup.
Capped 22 times by the All Blacks, McAlister moved to Sale after the 2007 World Cup but has stated that his move back to New Zealand is based largely on family reasons.
"The simple reason why I am leaving England and heading home is because I want to be closer to my family who are very important to me," said McAlister, who made his international debut in the third Test against the Lions in 2005.
"The fact that I can continue my rugby career as well back in New Zealand is obviously fantastic and I appreciate being given the opportunity, but family comes first."
McAlister's decision to play his rugby in his home country is a huge boost to the All Blacks, with assistant coach Wayne Smith believing that McAlister's best is yet to come.
"It's a decision I'm sure everyone in the country will be pleased with," said Smith, who himself spent time in England coaching Northampton Saints.
"He's at an age where he's still coming to his best.
"He's got versatility. He's played mainly 13 for Sale but he's been a top 12 internationally and a top 10.
"That gives him a lot of options. He's an interesting player to have in the squad because of those options but, like everyone else, he's going to have to play well and nail the spot."
Smith also believes McAlister's decision will have wider implications in terms of other players looking to return to the All Black fold from overseas.
"It's a positive sign for others around the world as well," added Smith.
"He'll be taking a big hit financially to make this decision. It shows the measure of his commitment to come back and play here.
"The key thing is it reverses the trend of players going overseas."
McAlister is yet to decide on which provincial and Super 14 teams to represent, with those decisions to be made when he arrives back in New Zealand this summer.
McAlister's immediate return to All Black colours is still in doubt, however, with current rules, stating that he would need to play a season of Super 14 or Air New Zealand Cup rugby to be eligible for the national side.