Houssem Aouar has reportedly spoken to his Lyon teammates to declare that he will be staying at the club.
The Lyon midfielder has been the subject of a bid from Arsenal, with the Gunners desperate to sign the Frenchman before the transfer window closes on Monday.
Talks had been ongoing between the clubs after Arsenal saw an initial bid rejected by the Ligue 1 club.
There was an expectation that the north London side would return with an improved offer to seal a deal.
But according to RMC Sport, Aouar emerged from a meeting with the Lyon hierarchy on Saturday and announced to his teammates that he would be staying at the Groupama Stadium this season.
Lyon president Jean-Michel Aulas previously set a deadline of Friday evening for all potential departures and admitted that Aouar could be among them if any club met the midfielder's asking price.
But with Arsenal yet to make a breakthrough in negotiations, Aulas took to social media on Saturday to hint that the Gunners' hopes were over.
"Complicated situation for [Lyon coach] Rudi Garcia before OL-OM [Lyon vs Marseille]," he tweeted in response to a report from L'Equipe, which claimed Lyon would let Garcia leave at the end of his contract.
"Stop saying we won't go beyond (his current deal) with Rudi [Garcia] it is not the truth.
"We make a very strong team by keeping our best players and we will judge on the results!"
Ahead of Arsenal's Premier League clash against Sheffield United on Sunday, Gunners boss Mikel Arteta had said he was confident the club would do all they could to land their key targets.
But Aouar's decision delivers a blow with Monday's deadline looming, and it is looking like Arsenal will have to look elsewhere.
“I am very confident with what we are trying to do internally," Arteta said in his pre-match press conference on Friday.
"The clarity from everyone in the club most importantly to get balance in the squad."
