The Blue half of Manchester are moving to their new ground at the end of the season, The City of Manchester Stadium, though it had been hoped Maine Road would survive.
Sale Sharks has been set to move into City's old home, but, after the announcement that their deal has broken down, the historic stadium will be destroyed.
The Blues have enjoyed some memorable highs during the final season in the stadium they have called home since 1923, none other than their 3-1 victory over city rivals United.
City council leader Richard Leese said: "We have explored fully a range of options with The Sharks and we cannot find a situation which benefits both the city council and the club."
Meanwhile, Chris Shuker has returned to the club following his loan spell with Walsall.
