• Kanye West, who goes by Ye, said Thursday he's terminated the contract between his company Yeezy and Gap Inc.
• In a letter sent by his lawyer, Yeezy said Gap failed to meet obligations in the agreement, including distributing products to store locations and creating dedicated YZY Gap stores.
• Gap CEO Mark Breitbard confirmed in a memo to employees Thursday that the retailer would "wind down" the partnership but said it would still work through its Yeezy product pipeline.

Kanye West, who goes by Ye, said Thursday he's terminated the contract between his company Yeezy and Gap Inc.

The move comes after Gap allegedly failed to meet its obligations in the companies' agreement, including distributing Yeezy products in its stores by the second half of 2021 and creating dedicated Yeezy Gap stores, according to a letter shared by his lawyer with CNBC.

Shares of the retailer fell nearly 4% Thursday.

"Yeezy notified Gap of its concerns in August and gave the company a contractually-designated 30 days to cure its breaches," Nicholas Gravante, a lawyer for Ye, told CNBC. He said Gap took no action on the concerns.

"It was always a dream of mine to be at the Gap and to bring the best product possible," Ye told CNBC's "Closing Bell" on Thursday. "Obviously there's always struggles and back-and-forth when you're trying to build something new and integrate teams."

Ye said he wasn't able to set the prices he wanted on his products and that he didn't approve of color selections.

"It was very frustrating. It was very disheartening, because I just put everything I had. I put all of my top relationships," Ye said. "Our agenda, it wasn't aligned."

He also said he was dissatisfied with progress on launching physical Yeezy stores in partnership with the retailer.

"Everyone knows that I'm the leader, I'm the king," Ye added. "A king can't live in someone else's castle. A king has to make his own castle."

Gravante said Gap's noncompliance with the agreement has been costly and that "Ye will now promptly move forward to make up for lost time by opening Yeezy retail stores."

Gap CEO Mark Breitbard confirmed in a memo to employees Thursday that the retailer would "wind down" its partnership with Yeezy.

"While we share a vision of bringing high-quality, trend-forward, utilitarian design to all people through unique omni experiences with Yeezy Gap, how we work together to deliver this vision is not aligned," Breitbard said in the memo, a copy of which was seen by CNBC.

The retailer still plans to work through its Yeezy product pipeline, Breitbard said.

"Important to know is that throughout this partnership, we have upheld our commitments – and the teams have done so with the utmost integrity, navigating obstacles and demonstrating incredible resolve," he said.

Announced in June 2020, the partnership between Gap and Yeezy was set to continue through 2026. Yeezy, owned solely by Ye, would receive royalties and equity based on the sales. Gap also agreed to distribute 8.5 million shares to Yeezy as certain sales targets were met.

The first product in the Yeezy Gap line, a blue puffer jacket, sold out in hours upon its release online in June 2021. Gap later made headlines selling Yeezy products in its Times Square store, but the termination letter said those products were the result of a separate contract between Yeezy, Gap and Balenciaga.

Following its launch, Wells Fargo predicted that the partnership could bring in $1 billion in sales in its first year. But Gap has been struggling with slumping sales and in August slashed its financial outlook. The company has acknowledged missteps with its Old Navy chain, and has been looking for a new leader since its CEO left in July.

In recent weeks, Ye has publicly aired his grievances with business partners. The rapper, producer and designer made his squabbles with Adidas well-known in a slew of Instagram posts attacking the company's board, and in an interview with Bloomberg said it was "time for me to go it alone."

"I made the companies money. The companies made me money. We created ideas that will change apparel forever. Like the round jacket, the foam runner, the slides that have changed the shoe industry. Now it's time for Ye to make the new industry. No more companies standing in between me and the audience," he told Bloomberg.

As a teenager, Ye worked in a Gap store and referred to his time there in the lyrics of "Spaceship," on his 2004 College Dropout album. West and Gap had reportedly been in contact about a potential deal since 2015.

— CNBC's Sara Salinas contributed to this report.