Lyon have reportedly announced to French media that Houssem Aouar and Memphis Depay will be staying at the club.
Aouar has been a key summer target for Arsenal as the Gunners strive to add creativity to their central midfield.
Talks have been ongoing between the club, with Arsenal having a first bid rejected by Lyon.
It was thought the Gunners would return with an improved bid in order to get a deal over the line, but according to RMC Sport, Lyon have ended negotiations with all clubs for Aouar and Depay.
The pair will reportedly be included in the squad for Sunday's game against Marseille and it is claimed that neither will leave Lyon before Monday's transfer deadline.
Earlier in the week, Lyon president Jean-Michel Aulas confirmed that two clubs - in addition to Arsenal - were interested in Aouar.
"We know that three big clubs are interested in him. Two in the short-term, one in the long-term," he said at a press conference. "Not much has happened.
"All the clubs can’t give us financially what Lyon wants."
Real Madrid and Paris Saint-Germain had been linked with a late move for the midfielder in recent days, but it appears Lyon will be keeping hold of their prized asset until next summer at least.
Arsenal's seemingly failed pursuit of Aouar leaves first team manager Mikel Arteta with a race against time to add the creative midfielder he craves ahead of the transfer deadline.
Speaking ahead of Arsenal's Premier League clash against Sheffield United on Sunday, Arteta said he was confident the Gunners would do all they could to land their key targets.
“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."
