Alan Gow is on his way back to Rangers after failing a medical ahead of a proposed transfer to Wolves.
The 25-year-old forward looked set to move to the Championship after the clubs agreed a fee of about £250,000.
Wolves manager Mick McCarthy said: "It's nothing serious, it's something bio-mechanical but that's something for Alan and Rangers to sort out, not us.
"He's a good player who would have added to the squad, but that's not going to happen."
Gow played only twice for Rangers after moving from Falkirk in June 2007 and he spent the first half of this season on loan at Blackpool, where he scored five goals in 17 appearances.
MY SPORT: DEBATEMcCarthy, a long-standing admirer of Gow, admitted that he was disappointed that the move had fallen through.
"Alan has gone back to Rangers. We'd agreed everything with him, but something has shown up in the medical which we are not completely happy about," he said.
"In a way, this is a credit to our medical team and how thorough they are.
"There's still plenty of time left in January and hopefully we will strengthen. We have a squad of players who have been doing well, but of course we will continue to try and bolster the squad."
Meanwhile, Rangers say Gow will see a specialist on Friday in a bid to cure the problem discovered by Wolves.
A club spokesman said that the 'bio-mechanical' problem that showed up in his medical could be treated with physiotherapy.
But the meeting with the specialist should determine whether the former Falkirk man will require surgery on the problem.
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