Mbappe's future is uncertain once again after the France captain released a statement via AFP on Tuesday to confirm he would not exercise his option to extend his deal by another year, meaning his contract will be up in June 2024.
"The board has been informed since July 15, 2022 of my decision not to extend beyond 2024, and the letter sent was only meant to confirm what I already told them," Mbappe said.
Sources have told ESPN that PSG would be willing to listen to offers of around €150 million ($161.5 million) for Mbappe this summer to avoid losing him for free a year later.
Mbappe also dismissed the links to Madrid as "lies" in response to a report from Le Parisien.
"LIES...At the same time, the bigger it is, the more it passes," he posted on Twitter. "I've already said that I'm going to continue next season at PSG where I am very happy."
Mbappe said after PSG secured the Ligue 1 title that he wants to stay in Paris next season, but sources close to the club dressing room have told ESPN that he informed teammates he wasn't ruling out leaving this summer, either.
Sources have told ESPN that Madrid are the player's preferred destination if he were to leave PSG this summer. Sources added that Madrid president Florentino Perez has been in touch regularly with Mbappe's camp and both parties were in contact again recently.
Madrid are now on alert, sources said, as they look for a centre-forward to replace Karim Benzema, who joined Saudi Arabia's Al Ittihad last week.
ESPN reported last week that Madrid view Tottenham's Harry Kane as the best available option to act as Benzema's successor, but there are doubts within the club about paying a high transfer fee for a player who turns 30 next month.
The LaLiga club have already brought in left-back Fran Garcia from Rayo Vallecano and playmaker Brahim Diaz -- returning from a three-year loan at AC Milan -- and agreed to a deal worth €103 million plus variables with Borussia Dortmund for midfielder Jude Bellingham.
Sources told ESPN that it's still too early to know what will happen with Mbappe, but Madrid are ready to move for him if PSG are willing to seriously consider a deal.
Madrid suspect that PSG would do whatever they can to see Mbappe join another club rather than Los Blancos, and any negotiations between the parties would not be easy.
Mbappe has been a long-term target for Madrid and Perez.
Mbappe was widely expected to move to Spain on a free transfer last summer -- after Madrid failed with several bids worth up to €200 million in 2021 -- before a U-turn saw him choose to renew with PSG until 2024 with the option of an additional year.
Mbappe finished sixth in the 2022 Ballon d'Or rankings, well behind winner Benzema.
Information from ESPN's Julien Laurens was included in this report.