Rio organisers said on Thursday the Sao Januario Stadium, home of football club Vasco da Gama, had missed the October 31 deadline and they would therefore revisit plans for the Joao Havelange Stadium to host the rugby sevens tournament instead.
A statement on the Rio 2016 website said Vasco da Gama had been requested in April to provide details and financial guarantees of the project to revamp the stadium for the Olympics.
While the original proposal was to convert the stadium into a 25,000-seater venue, club directors said last month that the plans would now see the Sao Januario turned into a 43,000 arena in time for the 2016 Games.
The International Rugby Board, which is investing £150 million over the next four years to support development in new markets such as football-mad Brazil, said it was aware of the stadium issues.
"The IRB has been kept fully informed by Rio 2016 of the ongoing discussions regarding the selection of the sports venue for the Olympic Games rugby sevens events," it said.
"The IRB will continue to work alongside Rio 2016 and the IOC to ensure the delivery of outstanding and successful rugby sevens events for teams, fans and the Olympic and rugby families."
Rugby was last played at the Paris Games in 1924 in the full 15-a-side form, but sevens was deemed an attractive option for the IOC due to its speed, youth appeal and the number of countries competing around the world.