The terms of the deal were not disclosed but French media reported that Diallo has signed a four-year deal after Al Arabi paid a 15 million euros transfer fee.
"I'll always be a Parisian and grateful to have worn this shirt," said the centre-back, who won two Ligue 1 titles, two French Cups and a League Cup with the capital club.
Diallo came through the youth ranks at AS Monaco and made his debut in 2014 before winning Ligue 1 in 2017.
He joins the Qatar Stars League after playing 75 games for PSG in all competitions since arriving from Borussia Dortmund in 2019 after spending a season at fellow Bundesliga club Mainz 05.
The French-born player went out on loan last season to RB Leipzig, where he made 15 appearances and scored once, also helping them to win the German Cup.
Diallo, France's former under-21 captain, has 23 caps for Senegal and helped them win the 2021 African Cup of Nations as well as featuring at last year's World Cup.