The Red Devils were reported to have signed Ander Herrera and he was ready to sign subject to a completed medical but Atletico Bilbao have now brought proceedings to a halt.
The 24 year-old was thought to have already completed his preliminary medical with the Old Trafford side as new boss Louis van Gaal looks to stregthen his midfield for a title push next season.
A club statement from the La Liga side said: “The Athletic Club wishes to report that this week it rejected an offer from Manchester United FC, estimated at €36m, to transfer the federation and economic rights of the player Ander Herrera.”
Previous manager David Moyes tried to sign Herrera last season but due to a farsical series of events including imposters trying to agree the deal, the transfer never happened.
And van Gaal, who is currently at the World Cup coaching the Netherlands, will be keen to avoid another disappointing summer of transfers as he rebuilds a side in desperate need of rejuvination.
By Phil Wellbrook