Last summer, Arsenal were able to sign Saliba on a permanent basis, first allowing the youngster to spend another campaign in his homeland to aid his development.
In order for the defender to feature in the Coupe de France final on July 24, Arsenal were prepared to reach a resolution with the Ligue 1 outfit.
However, in a statement released on Wednesday morning, the Gunners say that Saint-Etienne were not prepared to meet their requests over fitness plans and contribution of wages.
The statement read: "Despite the loan ending on June 30, we were willing to find a way for William to play in the [French] cup final on July 24, despite having no contractual obligation to do so.
"As William is returning from injury, we asked that Saint-Etienne follow a clear training plan with William in close collaboration with us, to ensure he is fully fit for the start of next season.
"To our surprise we were unable to reach agreement to this plan which was proposed by our medical experts, and we are simply not prepared to risk the welfare of an Arsenal player.
"While it was not our primary concern, and ultimately not relevant as our training plan was not accepted, we also expected not to be financially disadvantaged by extending the loan. This was also not acceptable to St Etienne.
"We know this is a disappointment for William but he understands we are working to protect his long-term interests and those of Arsenal."
Although Saliba is now free to train with Arsenal, the 19-year-old cannot feature in a competitive game until next season.