Manchester United have confirmed that Carlos Tevez is to leave Old Trafford, leaving the way open for Manchester City to attempt to take the striker to Eastlands.

The United chief executive David Gill had been in discussions with Tevez's advisor Kia Joorabchian, with the aim of keeping the popular Argentina player. But, despite the offer of a lucrative five-year contract that would have made Tevez one of the highest paid players at the club, the South American has decided to leave.

"Following contact received from Carlos Tevez's advisers last night, in advance of the deadline the club set for concluding negotiations, Manchester United announces that Carlos will not be signing a new contract with the club," said a statement released by United this morning. "The club agreed to pay the option price of £25.5m and offered Carlos a five-year contract which would have made him one of its highest-paid players.

"Disappointingly, however, his advisers informed the club that, despite the success he has enjoyed during one of the club's most successful periods, he does not wish to continue playing for Manchester United. The club would like to thank Carlos for his services over the last two seasons and wishes him good luck for the future."

Manchester City, Liverpool and Chelsea have all been linked with the striker, with City thought to be at the front of the queue. As the Eastlands club are on the verge of confirming Roque Santa Cruz's £16.5m arrival from Blackburn, it would represent a major statement of intent for a club also hoping to tie up the signing of the Barcelona striker Samuel Eto'o.

The news will be greeted with dismay by United fans, who have warmed to Tevez's all-action style during a two-year "loan" spell that has included successive Premier League titles and the Champions League in 2008. They had hoped some of the £80m about to be pocketed from Real Madrid for the sale of Cristiano Ronaldo would be used to keep Tevez.

However, after declaring earlier this season he was deeply unhappy at a perceived lack of match action – even though he made more appearances than either Wayne Rooney or Dimitar Berbatov, it was always likely the South American would move on.

It leaves Sir Alex Ferguson with a major rebuilding job to do in attack given he is still to secure a replacement for Ronaldo. The youngsters Federico Macheda and Danny Welbeck impressed last term and may be expected to have more involvement as United chase an unprecedented fourth successive title.

But Ferguson needs experience as well to compliment Rooney and Berbatov, who endured a patchy debut season at Old Trafford following his club-record £30.75m arrival from Tottenham.

Karim Benzema and Franck Ribéry have both been spoken of as potential targets, although there is no guarantee either will come. And while Antonio Valencia's £18m arrival from Wigan should eventually go through, his lack of goalscoring prowess is a worry.

With Ryan Giggs, Paul Scholes, Gary Neville and Edwin van der Sar about to embark on what many think will be their final seasons in top-flight football and memories of a comprehensive Champions League final defeat to Barcelona last month still fresh, Ferguson clearly has some unwanted headaches seven weeks ahead of the opening Premier League game against Birmingham.