The 19-year-old signed for the Gunners from Les Verts in a £27m deal last summer, but returned to France on loan for the season as part of the deal.
Ligue 1 was cancelled in April due of the coronavirus pandemic but the Coupe de France final between Saint-Etienne and Paris Saint-Germain will take place on July 24, and it was hoped a deal could be agreed to extend Saliba's loan until after the match.
But, the French club released a statement on Wednesday confirming Saliba would return to Arsenal and accused the Premier League club of making unacceptable demands during negotiations.
“ASSE, which simply wanted the extension of the initial loan until July 24, could not find an agreement in the evening with Arsenal to allow the defender to properly prepare and play this meeting, the English club imposing absolutely unacceptable sports and financial conditions,” read the statement.
The news comes after Gunners boss Mikel Arteta admitted that Saliba deserved to play in the final, saying: “He has earned the right to play in that final if the manager wants to do that.
“I think we have to give him the opportunity to do that, to enjoy that and we can have him after that.”