Newcastle have confirmed backline utility Dane Gagai will leave the NRL club at the end of this season.
Gagai informed his Knights teammates before joining the Queensland State of Origin camp on Monday.
"We are obviously disappointed that Dane has decided to leave the club, but we respect the decision he has made with his family," CEO Matt Gidley said in a statement.
Gagai is expected to take up a three-year deal with South Sydney worth a reported $2.1 million.
He had a mixed outing in Sunday's loss to Penrith, carrying the ball for just 85 metres - well down on his average 115 metres - and committing two errors.
However the 26-year-old did produce a team-high five tackles busts.
"Gags obviously had some crucial errors there today and these (contract talks) do affect them," Newcastle coach Nathan Brown said.
Gagai joined the Knights in 2012, and has played 116 of his 122 NRL matches for Newcastle.