Modric, who has expressed a desire to join Chelsea this summer, held a meeting with Tottenham chairman Daniel Levy on Thursday in an attempt to provide a resolution to the issue.
Modric did not feature in Spurs' 0-0 draw with Hearts in the Europa League on Thursday night - and thus remains eligible to represent other clubs in Europe - but Redknapp insists nothing should be read into his omission.
Asked whether the saga was now behind them, Redknapp said on Thursday night: "Yeah, I think it's finished."
Spurs take on Manchester City in the Premier League this weekend and Redknapp added: "He'll be playing on Sunday for sure.
"I think there was a meeting. Daniel just said the same thing - he's not for sale. It's been difficult for him but we want him to stay and he will stay. He'll train tomorrow and Saturday and should be fit for Sunday.
"He could have kicked up and been a problem and if he had done it would have been difficult to keep him. If players want to be destructive they can be but he's not got that in his nature. He'll stay and play and will be great as he has been every other year."
Redknapp is also looking to add to his midfield and, although Diarra has been quoted as saying he did not expect to join Spurs, it appears a deal could still go through.
"Things haven't broken down," Redknapp said. "There is still a good chance. The chairman is working on it. I signed him at Portsmouth and they sold him for £22 million. He's real talent, a fantastic player and it's a real possibility still."
While the players were focusing on the match against Hearts, Tottenham announced two loan signings, with Yago Falque and Emmanuel Adebayor joining for the season from Juventus and Manchester City respectively.
Redknapp said there was the possibility the Adebayor deal could be made permanent and is confident the fans will not hold his Arsenal past against him if he performs.
"If he comes in and does fantastic they'll all sing, 'There's only one Adebayor'," he said. "If he's useless they'll sing something else. That's football and it has never changed.
"No-one has fallen out with the Arsenal fans more than he has. He's the most hated ex-Arsenal player in history. The fans will love the fact that the Arsenal fans don't like him. If he comes here and does great we will want to keep him here."
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