The 22-year-old South Korea international has returned to the club where he enjoyed a successful loan spell last season, the Black Cats confirmed on Thursday afternoon.
The Barclays Premier League club said in a statement: "Striker Ji Dong-won has joined Bundesliga side Augsburg on a permanent basis for an undisclosed fee."
Ji arrived at the Stadium of Light from Chunnam Dragons in 2011 as then manager Steve Bruce scoured the world for reinforcements.
However, he struggled to establish himself on Wearside and was sent out on loan to the Bundesliga club, where he did so well that he was the subject of a £5million summer bid.
Paolo Di Canio, who had by that point replaced Bruce's successor Martin O'Neill at the helm, decided the frontman had a part to play and the offer was rejected.
But having been given a chance by current boss Gus Poyet in recent weeks, he struggled to make an impression and the club decided the time had come to dispense with his services.