The Morocco international had looked set to remain at the Philips Stadion but talks with sporting director Marcel Brands collapsed and he will now join Ricardo Sa Pinto's side
The midfielder spoke of his optimism regarding his proposed switch to the Portuguese capital, but directed criticism at his employers for their handling of his transfer situation.
"I think Sporting will be the right move for me. They work with many young talents and I had a good feeling about them," he told Telesport.
"[Sporting director] Marcel Brands spoke to my father on Sunday, but he confirmed that there was no new proposal from the club to retain me.
"He then called me on Wednesday and told me Benfica were interested. I was disappointed about that as well. PSV already wanted to sell me in January, but I then wanted to stay in Eindhoven.
"Now PSV attempted to sell me to Benfica again, and I have therefore opted to join Sporting instead."
PSV recently announced that they had exercised their option to extend Labyad's expiring contract till June 2014, but the midfielder claims the Eindhoven side's option wasn't valid and intends to leave on a Bosman move this summer.
Labyad is expected to sign a five-year contract with Sporting, but a legal battle appears to be on the horizon about the validity of PSV's option to extend the midfielder's deal.