The 29-year-old heads back to Serie A in a deal understood to be worth around €4 million (£3.6m/$4.3m) plus a sell-on fee.
Darmian was signed from Torino by Louis van Gaal in the summer of 2015 for a reported fee in the region of £12.7 million ($15.3m).
The defender was a regular during his first season at Old Trafford, making 39 appearances in all competitions.
But the 29-year-old struggled for action after Van Gaal’s departure the following summer, with his successor Jose Mourinho preferring Antonio Valencia in the right-back position.
Darmian made just 53 appearances in three seasons across all competitions and has yet to feature at all this campaign, with current Red Devils boss Ole Gunnar Solskjaer making him available for transfer.
“Manchester United can confirm that defender Matteo Darmian has signed for Italian side Parma,” read a statement on the Manchester United website.
“The full-back joined the Reds from Torino in 2015 and went on to make 92 appearances for the club.
“In four years with us, Matteo scored one goal - a sublime volley against Crystal Palace in 2016, in a 2-0 victory at Old Trafford.
“Everyone at Manchester United would like to thank Matteo for his service and wish him all the best for the future.”
Darmian began his career at Milan but made just seven appearances in four seasons before joining Palermo in 2010.
He spent just one season with the Rossoneri, making 16 appearances, before joining Torino.
He helped earn the club promotion to Serie A in his first season in Turin and was a regular in the side as they established themselves back in the top flight.
Darmian’s performances earned him a debut for the senior Italy side in 2014 and he has gone on to make 36 appearances for the Azzurri.
The defender joins Romelu Lukaku in leaving Manchester United for Italy on a permanent deal as Solskjaer continues the reshaping of his Red Devils squad.
Alexis Sanchez and Chris Smalling also left the club on loan, with Sanchez joining Lukaku at Inter while Smalling moved to Roma.