Wieden & Kennedy beat AMV BBDO in the final stage of the review, which was handled by AAR. It is understood that both agencies were told the final decision this afternoon.
Mother and MullenLowe London were kicked out of the process earlier this month. It is understood that CHI & Partners and Grey London also met with Sainsbury’s before going on to pitch for Marks & Spencer, which the latter won.
Sarah Warby, marketing director at Sainsbury’s, said: "I’d like to thank AMV BBDO for the enormous contribution they’ve made to our business over many years. This has included some truly iconic campaigns, from Jamie Oliver to recent Christmas campaigns like Christmas truce and Mog the cat.
"We will continue to work closely with the AMV BBDO team over the coming months, including our Christmas 2016 campaign, while in parallel planning the transition.
"This was a very difficult decision but we felt it was important to get a fresh perspective and I’m delighted to welcome W&K to Sainsbury’s."
Campaign revealed Sainsbury’s was talking to creative agencies in June. At the time sources said Sainsbury’s had not decided whether to take the review to a full pitch.
AMV BBDO picked up the Sainsbury's account in 1981 and last had to fight to retain the business in 2005 when it fought off competition from WPP's J Walter Thompson.
Ian Pearman, chief executive of AMV BBDO, said: "We couldn't be more proud of the work we've done with Sainsbury's and the brand we've helped them become. We have loved every minute.
"They have chosen a very different kind of agency for their next phase of development and we wish them every success in the future."
Sainsbury’s advertising in the first decade of the noughties was dominated by its relationship with Jamie Oliver and coincided with his campaigning TV shows such as Jamie’s School Dinners.
Rival supermarkets have since attempted to emulate Sainsbury’s success with Jamie Oliver. Waitrose works with Heston Blumenthal and, most recently, Asda has signed the former Saturday Kitchen host James Martin.
In recent years Sainsbury's has sought to compete with the nearest thing the UK has to a Super Bowl – the Christmas period – competing against the likes of John Lewis and M&S.
In 2014 AMV created "Christmas is for sharing", a retelling of the legendary Christmas football match story in which German and British forces played football during the First World War.
Last Christmas, Sainsbury’s resurrected Mog, the cat from the children’s book series by Judith Kerr. The supermarket later praised the ad’s success for helping it perform well during the festive period.