Last summer was dominated by discussion about the talented 21-year-old swapping the Bundesliga for the Premier League, although a deal did not come to fruition then.
However, the former Manchester City attacker Sancho is now heading back to the north west and joining United, with Dortmund confirming they have reached an 85m euros (£73m) agreement.
It is understood the fee will paid in five instalments, with the forward set to sign a five-year deal with the option of a further season.
In a statement on their official website, Dortmund said: “Jadon Sancho is close to (a) move from Borussia Dortmund to Manchester United. This is today’s agreement of both clubs and the player in principle.
“Upon realisation of this transfer Manchester United will pay BVB a fixed transfer compensation in the amount of 85m euros.
“The contractual details now have to be coordinated and completed.
“Moreover, the formal processing of the transfer is still subject to the successful completion of all necessary medical tests and examinations, a coordination procedure with the player’s previous club and the proper and timely processing in accordance with the provisions of the FIFA transfer matching system.”
Later on Thursday the news was confirmed by the Old Trafford giants.
“Manchester United is delighted to announce it has reached agreement in principle with Borussia Dortmund for the transfer of Jadon Sancho,” they said in a statement.
“The signing is subject to contractual terms and a medical, which will be completed after Jadon’s involvement in the UEFA European Championship.”
Sancho was part of Manchester City’s academy before leaving the club to sign for Dortmund in August 2017. He has made 137 appearances in all competitions for the German club, scoring 50 goals.
This deal would see Sancho, who has scored three times in 20 senior international appearances, become the second most expensive Englishman behind Harry Maguire who United signed two years ago from Leicester for £80m.
The news was welcomed by Marcus Rashford who is with Sancho on England duty preparing for Saturday’s Euro 2020 quarter-final against Ukraine.
The United academy graduate posted a photo of the pair with the caption “Family @Sanchooo10 Welcome brother”
It is understood United are close to confirming the signing of former academy player Tom Heaton.
The 35-year-old goalkeeper spent a number of loan spells away from the club before permanent stints at Bristol City, Burnley and Aston Villa.
United are also looking at defensive reinforcements and have held discussions over Real Madrid centre-back Raphael Varane, but it remains to be seen whether a deal can be struck for the France international.