Celtic had announced they had accepted a bid for Dembele earlier Friday, with Lyon president Jean-Michel Aulas confirming to reporters following his club's 1-0 loss to Nice that a contract had been agreed.
"Moussa Dembele has just committed for five years. It's a transfer of €22 million," Aulas said.
While Dembele had been linked to Marseille and Borussia Dortmund, links to Lyon heated up after the French club sold striker Mariano Diaz back to Real Madrid earlier in the week.
Celtic initially refused to part with their forward, with manager Brendan Rodgers confirming bids had been made for the player but that it was unlikely Dembele would leave.
Earlier Friday, Dembele posted a message on social media, indicating he believed promises were broken in the club refusing to sell him to Lyon.
A statement from Rodgers has now claimed Celtic never promised Dembele could depart, but admitted the club has accepted the latest offer from Lyon, paving the way for the striker's departure ahead of the transfer deadline.
“Every decision we make at Celtic will always be in the best interests of the club and our supporters," the statement said.
“It is vital to make clear that we have never promised any player that he can leave the club at a particular time. It has never happened. In fact, we have said all along that we did not wish to sell Moussa, given the circumstances within the transfer window and that is why we rejected a significant offer yesterday.
“However, this particular decision to accept this offer has been taken in order to serve the best interests of the first-team squad, my coaching team and the culture and environment we have created in these last two seasons.
“The Board and myself are united and they have been very supportive to me on this issue."
The statement concluded with: “Finally, I would like to thank Moussa for his contribution in our last two seasons and want to wish him well in his new adventure at Lyon.”
The striker scored 17 goals in the Premiership in his debut season and followed that up with nine tallies last season - both coming in Celtic title-winning seasons.
The 22-year-old Dembele, who has represented France's youth squads on multiple occasions but has never received a senior call-up, will now look to continue his growth back in his home country.