The £8million centre-back failed to return for pre-season training this summer, leading to suggestions that he was on his way out.
And Sunderland have now confirmed that Djilobodji finally turned up over a month late, failing every fitness test available.
It means the defender has been "given notice" of his £30,000-a-week contract as a result.
Sunderland claim they allowed Djilobodji to go on unpaid leave in July in order to find himself a new club.
Failing that, he was expected to return to the Stadium of Light for the start of pre-season in the condition needed to play football.
Sunderland claim he has breached his contract by not following those rules, with Djibolodji still having two years to run on his deal.
Djilobodji is likely to appeal the decision as he claims he did not know he had to return to Sunderland in August.
Meanwhile, Black Cats midfielder Didier Ndong, 24, is still AWOL and the club are considering suing them both for ‘wilfully devaluing their contracts’.
An official statement read: "Sunderland AFC has given notice under its contract with Papy Djilobodji.
"Djilobodji, who was under contract to SAFC until June 2020, indicated in June 2018 that he wished to leave the club.
"In order to facilitate that desire, the club entered into a written agreement with the player allowing him to spend the month of July on voluntary unpaid leave.
"When that period came to an end, the player was expected either to leave for a new club – having reached a deal satisfactory to himself and SAFC – or to return in shape to play professional football.
"Instead, he returned to Sunderland over a month later, in the first week of September, ignoring written requests for his return.
"On his return, he was subjected to the same fitness test that his fellow professionals had undertaken on their return. He comprehensively failed that test.
"As a result, Sunderland AFC can confirm that it has accepted Papy Djilobodji's repudiatory breaches of contract and notice of the same has been provided to the player."
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