Schlupp has made just one Premier League start for the Foxes all season and has not featured in any competition since the 5-0 Champions League defeat to Porto last month.
The likes of Crystal Palace and West Bromwich Albion have been linked with a £12m move for the 24-year-old, and Ranieri acknowledged that the Dutchman "deserves" more playing time than he will get at the King Power Stadium.
"He's of course not happy. I said if he wants to go he can go. After this the money for the club is important. If the right money arrives he can go," he told reporters.
"He has great potential, I am very sad to lose him. I understand but I have three good left-sided players, Ben Chilwell, Christian Fuchs and him. I would like to keep one experience and one young and Jeff played so few times. It's not right, he deserves to play, he deserves to show his potential."
Schlupp, who made 24 appearances during Leicester's title-winning campaign last term, was left out of Ghana's squad for the Africa Cup of Nations due to his lack of game time.