United are expected to release an official statement in the coming days.
Giggs, 42, had a year remaining on his contract as assistant manager but new boss Jose Mourinho intends to fill that role with long-time friend Rui Faria.
Unable to reach agreement over another role at the Premier League club, Giggs, who made a record 963 appearances for United, has decided to move on.
Cardiff-born Giggs has his Uefa Pro Licence, a mandatory qualification for managing in the Premier League, and has never made any secret of his desire to move into management.
Linked with Swansea last season, he felt he was ready to manage United, having served his apprenticeship under David Moyes and then Louis van Gaal.
But he was known to be less than impressed with how Van Gaal's exit was handled by United, when news of the Dutchman's sacking emerged moments after the club's FA Cup final success.
Giggs was also disappointed to be overlooked in favour of former Chelsea and Real Madrid boss Mourinho, whose appointment was confirmed in May.
Giggs joined the United academy on his 14th birthday, turning professional aged 17 in November 1990 and making his first-team debut against Everton on 2 March, 1991.
He won a record 13 league titles, two European Cups, four FA Cups and four League Cups to become the most decorated British player of all time.
He became a player-coach following the arrival of Moyes as manager in 2013, taking control of the first team for the final four games of the season after the Scot's dismissal.
Giggs was then appointed as assistant-manager by Van Gaal in 2014.
Giggs represented one of the final links to the Ferguson era - and given his service and achievements at United, the club risk a potential PR disaster in letting him leave.
The Welshman was largely responsible for promoting exciting 18-year-old England striker Marcus Rashford to the first team last season and is the embodiment of the United traditions of a commitment to youth and attacking football.
However, he was part of a static management team criticised by fans, pundits and former players for a dull style of play which ultimately cost Dutchman Van Gaal his job.
Wales manager Chris Coleman has previously said Giggs could benefit from the "spark" of stepping out of his "comfort zone" at United, backing him to "cut his teeth somewhere else and prove he has what it takes to go back there".
Similarly, United goalkeeping great and former team-mate Peter Schmeichel said Giggs should "learn the trade" of management at another club.
Giggs won the Champions League twice as a United player.
Testimonials:
"I remember the first time I saw him. He was 13 and he floated across the ground like a cocker spaniel chasing a piece of silver paper in the wind" - former Manchester United manager Sir Alex Ferguson
"He's an outstanding player and it's a privilege to be working with him on my staff. I've seen something different since I've come here - just how good he is, close up - and it's incredible" - former Manchester United manager David Moyes
"Ryan Giggs for me is one of the best players in the world. Now maybe he is old but he is a fantastic player" - former Manchester City manager Roberto Mancini
"Maybe one day people will say I was another Ryan Giggs" - Manchester United legend George Best
"Eric Cantona is a great player, but he's not as good as Ryan Giggs" - Dutch legend and three-time world player of the year Johan Cruyff
"Only two players made me cry when watching football, one was Diego Maradona and the other Ryan Giggs" - Italian World Cup winner Alessandro Del Piero
"I can't remember exactly how old I was but I remember pretending to be Ryan in the back garden" - Manchester United midfielder Tom Cleverley
"Every day of the week, every week of the year for the last 15 years he has been a top player" - former Cardiff manager Malky Mackay.
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