"Today's deadline imposed by Major League Soccer commissioner Don Garber regarding a resolution of David Beckham's potential transfer to AC Milan has passed and we did not receive an acceptable offer for the player," Galaxy general manager Bruce Arena said in a statement.
"As a result, David remains an LA Galaxy player and we look forward to having him back with the club starting March 9."
The Galaxy rejected an initial bid made by Milan last week.
Earlier this week, Garber gave the Galaxy a Friday deadline to settle the issue and Milan, according to Italian media, made a final offer for the Englishman late on Thursday.
In a letter to Tim Leiweke, chief executive of AEG, the entertainment conglomerate that owns the Galaxy, Garber had said any agreement between the clubs would be supported if the matter was finalised by February 13.
"We are prepared to be supportive of transferring David to AC Milan for a transfer fee that acknowledges the value of his services to the Galaxy and the League," Garber wrote.
"However, if the issue is not resolved by the end of the week, it will be difficult, if not impossible, for us to go forward with the transfer."
Garber confirmed, though, that Beckham has a clause in his five-year contract with MLS and the Galaxy that would allow him to leave the United States at the end of the 2009 season.
HIGHER OFFER
Last week the Galaxy rejected Milan's first bid for Beckham, saying the former England captain would return to Los Angeles as scheduled unless the Italians came up with a substantially higher offer.
"If David ultimately is an asset for this team, we want him back," Leiweke told the Los Angeles Times.
"If David ultimately has a hunger and a desire to come help us make the impact on the pitch we wanted to make with him but haven't done yet, then he's an important member of this team and our intention is to bring him back.
"If David's in a position where he wants to finish the season in Milan and Milan in turn compensates the Galaxy so we can suffer no damages to our fans or to our team, then we'll take a look at it.
"But we have made it very clear to them we expect David back here on March 9. They agree and understand we own the contract. They understand the only way we do this is if, when this is all said and done, the Galaxy benefits."
Beckham, 33, moved to the United States midway through 2007 on a five-year deal as part of an orchestrated bid to lift American soccer to a new level.
After scoring just five goals for the Galaxy in 30 games since his arrival in MLS, Beckham joined Milan on loan during the U.S. close season and has remembered what it is like to play soccer in the top flight.
Since arriving in Italy, he has scored two goals in his first five starts and has revelled in the company of world-class players.
