The 24-year-old has not played for the Wallabies since their heavy loss at the hands of Scotland on last year's Spring Tour, after which he joined Suntory in the Top League.
With Japan hosting the 2019 Rugby World Cup, however, the surrounding Top League seasons were drastically shortened - leaving a window for Australian players to return home for a Super Rugby season and a potential World Cup tilt.
The Reds, Rebels and even the Force approached McMahon but RUGBY.com.au can reveal he turned his back on all offers to sign for the Sunwolves for the 2019 Super Rugby season.
A Sunwolves official confirmed McMahon had signed a one-season contract.
It’s understood the deal was done in July.
The Sunwolves play in the Australian conference but they are still regarded as a foreign side and Aussie players at the club are therefore not eligible for the Wallabies.
While the Sunwolves deal doesn’t entirely kill off the chances of McMahon playing at the World Cup – he could still sign for an Australian Super Rugby club in 2020-21 and therefore be eligible for selection – it is understood the flanker intends to stay in Japan and extend with Suntory.
He is understood to be earning around $800,000 per year in the Top League, well over his earning capacity in Australia given the hefty salaries of fellow star flankers David Pocock and Michael Hooper.
McMahon has been sorely missed by the Wallabies in a disappointing 2018 campaign, and will be a huge loss for the Wallabies’ World Cup campaign if he does not figure.
McMahon’s destructive, tireless carries were a significant cog in the attacking machine which kept the Wallabies ticking in 2017 and they have lacked a line bending backrower since his departure.
Asked earlier this month about bringing the star flanker home, Cheika said he'd been "very clear" in putting an offer on the table.
"We’ve been really clear with Sean about what we’d like," Cheika said.
"The ball is in his court."
The Sunwolves announced their initial squad on Tuesday.
Star Kiwi winger Rene Ranger headlined a list of new recruits, the signing of McMahon expected to be unveiled in the coming weeks.