Parsons will leave Memphis as the organization and his agent, James Dunleavy of ISE Sports, work to structure a resolution on Parsons' future, sources said.
Parsons, 30, is owed $38 million on his original four-year, $94 million maximum contract, including $25.1 million for the 2019-20 season.
The sides will work to find a trade for Parsons, sources said. The Grizzlies haven't shown a willingness to include a first-round draft pick to move Parsons' deal but have been open to accepting a longer-term contract for him, league sources said. The team still believes Parsons will have value as an expiring contract, even if it takes into the offseason to make a deal.
The final disagreement that led to Parsons leaving the team and city -- perhaps permanently -- has been centered around the circumstances of a possible G League assignment.
Grizzlies GM Chris Wallace wanted Parsons to play several games with the Grizzlies' G League affiliate, the Memphis Hustle, before deciding on returning Parsons to the active roster with the Grizzlies, sources said.
Parsons has been willing to play games with the G League affiliate but wanted a clearer plan and a timetable in place that would return him to the Grizzlies' active roster, league sources said. Trips to the G League for veterans are traditionally treated as rehab assignments, not tryouts.
Parsons earned a starting job out of training camp this fall and hoped to rejoin the struggling Grizzlies' rotation weeks ago. Memphis has lost 12 of 15 games after a strong start, falling to 18-21 overall.
Parsons has not played since exiting the Grizzlies' third game of the season. However, he has been medically cleared since Dec. 21 and practicing and scrimmaging with the Grizzlies during that time while pleading with Wallace to let him return to game action.
Parsons had chosen to scrimmage 5-on-5 with the Grizzlies to prove his readiness in recent weeks and made a positive impression on the coaching staff and teammates with his ability to still contribute offensively, sources said. Management still had questions about him defensively and wanted to see him in live action with the Hustle. For now, there appears to be no pathway forward together between the two sides.
Based on discussions with the Memphis medical staff, Parsons expected to return for a Dec. 21 road game in Sacramento, sources said.
"Let me play!" Parsons shouted at Wallace several times after hitting 3-pointers during the scrimmage, sources said. Wallace and the organization haven't been willing to do that without a G League assignment -- and admittedly told Parsons even that might not be enough to convince them.
Parsons has been limited to 73 games, primarily because of knee problems, since signing with the Grizzlies in the summer of 2016. He has averaged seven points in 19.3 minutes per game for the Grizzlies.
Parsons had season-ending surgery on his right knee in the previous two years before he came to Memphis, prompting the Dallas Mavericks to decide not to attempt to re-sign him. Parsons then had season-ending surgery on his left knee in the spring of 2017, his first year in Memphis.