Wanderers have become increasing frustrated by Forest's refusal to meet their conditions and have now pulled the plug on any potential transfer, declaring the matter closed.
Chief executive Jez Moxey told the club's official website, wolves.co.uk: "Our position has been firm but consistent - we don't want to lose Bakary Sako.
"Everyone involved in these discussions is fully aware of what our requirements were to, reluctantly, allow Bakary to leave. However, we took the decision to cease all discussions with Nottingham Forest not because they didn't meet our valuation but because the terms surrounding the offer were unrealistic."
Wolves are understood to want at least B£4million for Sako, who Forest this week renewed their interest in signing having tried to get him during the summer transfer window.
The Reds had a handful of bids rejected during the close season culminating in an offer of around B£3.5million on transfer deadline day on September 2.
Forest this week proposed a loan deal until January, when Sako's switch to the City Ground would then become a permanent move.
- Sports & Recreation
- Bakary Sako
- Nottingham Forest