Leicester City and Leicester Tigers have shelved plans to share the football club's Walkers Stadium.
Plans to share the Walkers Stadium have been scrapped
In the last eight months, the clubs and authorities had productive talks but they could not settle the issue of whose fixtures would have priority.
"We came a long way in our negotiations but could not quite get over the finishing line," said City chief executive Tim Davies.
The Tigers say they intend to go ahead with plans to redevelop Welford Road.
The Walkers Stadium hosted this year's Heineken Cup semi-final between the Tigers and Toulouse, when the English club needed a neutral venue.
Earlier this year the clubs issued a joint statement announcing their "visionary and ground-breaking" plan to share the stadium, but they could not reach an agreement.
"Whilst the football and rugby authorities have been very understanding, it was not possible to resolve the primacy issue to achieve the equality that both clubs were looking for which was one of the commitments that we made to our supporters at the time of the announcement, said Tigers chairman Peter Tom.
"We remain committed to providing the best possible facilities for our players and supporters as we strive to become the most successful club in world rugby.
"We have also reached agreement to buy Welford Road and the adjacent land necessary for redevelopment, subject to planning approval.
"We have a planning application lodged with the City Council for the first stage of a redevelopment project, to create a stadium that Tigers supporters, and the people of Leicester, can be truly proud of."
City chairman Tim Davies told BBC Radio Leicester that he did not think the failure of the plan was anything to be ashamed of.
"I don't think it's embarrassing at all - I think it's a credit that we got this far," he said.
"We've explored all the options and we knew that primacy was going to be an issue. Before you talk to people seriously, you never know.
"If you look at primacy from a football perspective, it's not an issue - we just felt it was fair to the rugby club in the spirit of having a 50-50 venture.
"Given that the police won't allow us to play at the same time now anyway, I wonder in practice whether primacy is as big an issue as it seems on paper."