Romelu Lukaku has told Everton he will not sign their latest contract offer but talks will continue, Sky sources understand.
Everton were willing to make the Belgium international, who has just over two years remaining on his current deal, their highest-paid player.
Last month the player's agent, Mino Raiola, stated Lukaku intended to snub interest from Chelsea and commit his future to Everton but the negotiations have broken down with the player informing the club on Tuesday afternoon he will not sign the deal as it stands.
At the weekend, a Belgian broadcaster asked Lukaku whether he was going to sign the contract, whether he was still reflecting on it and whether there was an agreement and to each question the striker simply answered: "No".
Reports then claimed there was a disagreement over a proposed release clause with Everton wanting it set at £90m and Lukaku's side looking for the figure to be closer to £70m.
The news is a blow to Everton's board who had been informed by Raiola in December the deal to extend Lukaku's contract was "99.9 per cent" done.
However, it is understood both the club and the player have not given up hope of reaching an agreement.
Lukaku arrived at Everton in a club-record £28m deal from Chelsea in 2014 and is the Premier League's joint-top scorer this season, alongside Harry Kane on 19 goals.