The United Arab Emirates club had hoped to sign the 28-year-old for a reported fee of AU$1.6m, which would have been a new A-League record, but Victory have now announced the bid has been withdrawn.
The news is another major boost for the powerhouse club, which on Wednesday also announced the signing of Brisbane Roar's Besart Berisha, who will move following the expiry of his contract at the end of this season.
That comes just a day after unveiling promising young playmaker Tom Rogic, who has joined Victory on loan from Celtic for the remainder of the A-League campaign.
Milligan was the subject of significant interest from Crystal Palace in September following their promotion to the English Premier League.
The Socceroo was believed to be keen on a move to England's top flight, but that deal ultimately fell through.
Milligan, a strong candidate for a place in Australia's starting XI at the World Cup in Brazil later this year, is out of action following surgery to clear up a long-running knee problem.
The versatile former Sydney FC and Newcastle Jets player, who initially joined Victory on loan from JEF United Chiba before making the move permanently at the beginning of the 2012-13 season, is expected to return to action in the next four to six weeks.
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