Velez Sarsfield have told Manchester City they can only sign Thiago Almada for his buyout clause.
City have failed with a new undisclosed offer, with Velez insisting the midfielder can only leave for his €16m buyout option.
The stand-off is a blow for Sporting CP, which have an agreement with City to take Almada on-loan for the new season.
Sporting president Sergio Rapisarda told O Jogo: "The offer did not meet Vélez's expectations."
Velez management met with Almada's agent Agostin Jiménez on Monday to discuss new terms.