Grayson, who signed the 29-year-old for Leeds in 2009, thought he had a deal agreed, but Gradel opted to return to France, having previously played for St Etienne.
“We spoke to Max and he eventually decided to go back to France," the boss said after his side kept their unbeaten start to the season going with a 1-1 draw at Sheffield Wednesday in the Sky Bet Championship.
“We had agreed something with Bournemouth and ultimately he is a good player that I wanted to bring to the club.
“It shows you where we are as a club with the players that we are looking at.
“That would have been a big signing for us if we had managed to do it, but he just felt his family wanted to go back to France and that was a disappointment for us, but that is part and parcel of the transfer window."