The football exhibits will move to Urbis under the plan
The National Football Museum in Preston is to close at the end of the month.
Plans to move the museum from its home on Sir Tom Finney Way, Deepdale, to Manchester's Urbis exhibition centre were revealed in October.
But the museum had said it hoped to keep a "public face" in Preston if funding could be secured.
These hopes were dashed as Lancashire County Council leader Geoff Driver and Chair of Trustees at the museum Paul Dermody failed to agree on funding.
Councillor Driver said: "We can't put our taxpayers' investment into keeping the museum present in Preston, because the trustees in Manchester aren't able to guarantee to us the security of that investment and that we will get value for money for it.
'No red herring'
"The chief executive and the council's most senior lawyer have spent a great deal of time on this.
"People can be reassured we have tried our very best and we are as disappointed as anybody that the football museum is not going to stay in Preston."
Mr Dermody said the outcome of the meeting was "unfortunate".
He said: "There was no way it was a red herring by any stretch of the imagination.
"It was a very valid and well thought-out proposition that we put forward.
"It was just unfortunate that we were unable to come up with a conclusion to satisfy the final requirements of the consortium, and that was it."