Footage had emerged of the Manchester United target in attendance at the party alongside England teammates Tammy Abraham and Ben Chilwel.
The party also had about 20 other friends and family, in breach of England’s coronavirus laws.
This is coming after Sancho missed Dortmund’s Saturday’s 4-0 victory over Freiburg due to illness.
The 20-year-old was suffering from respiratory issues described as with cold-like symptoms.
Sancho tested negative for coronavirus, but Dortmund decided not to take any risks with him. They kept him separated from the rest of the squad throughout the week.
They later allowed him to leave Germany for England ahead of the international break this week.
But the birthday incident has fueled speculation that Sancho’s absence from the Dortmund squad may be more than just illness.
Though no official comment has been made, the Football Association are understood to be investigating the matter.
Sancho could be up for a fine. Under current restrictions, people who mix in groups of more than six can be fined up to £10,000.
The celebrant, Tammy Abraham, has meanwhile apologised for the incident. However he insisted that he was not aware of the celebration before he arrived.
He told The Sun: “I arrived home to find a small surprise gathering.
“Though I was totally unaware this was planned, I would like to wholeheartedly apologise for the naivety shown for the organisation and attending of this gathering.
“All I can do now is learn from it, apologise to everyone and ensure it never happens again.”