Serie A - Milan's Tevez talks collapse
The Rossoneri had been in pole position to sign the striker and made an apparently decisive move on Thursday when sending a delegation to England to conclude the deal.
Vice-president Adriano Galliani headed the team that met with Tevez's representative Kia Joorabchian in London but, following the news that Alexandre Pato will be staying at San Siro and shunning interest from Paris Saint-Germain, Milan announced a deal was off.
Galliani said: "Tevez will not join Milan."
The development seemingly re-opens the door to Internazionale, who earlier on Thursday had admitted defeat in the race to sign Tevez.
When asked in the morning if Tevez would be signing for Inter's city rivals, president Massimo Moratti said "I think so", before adding "that's football".
Tevez has not played for City since a Carling Cup tie against Birmingham City in September.
The Argentina star has scored 44 goals in 69 Premier League games for City but the dispute around his alleged refusal to appear as a substitute in a Champions League game against Bayern Munich burned his bridges with the club.