Arsenal midfielder Lucas Torreira is no longer a priority signing for Torino, club director Davide Vagnati told Sky in Italy.
The two clubs were discussing a season-long loan for Torreira with an option to make it permanent next summer, with the Serie A club paying £22m over two equal instalments.
Arsenal are open to selling the Uruguay international in order to fund a move for other midfield targets and free up space in Mikel Arteta's squad for other arrivals.
Reports emerging in Spain suggest Atletico Madrid are interested in signing the 24-year-old.
Meanwhile, Arsenal have shown interest in the Atletico midfielder Thomas Partey - who has a £45m release clause - but have yet to find a breakthrough in negotiations.
Summer transfer window - key dates and times
The summer transfer window closes at 11pm on Monday October 5 with a feast of activity lined up on Transfer Deadline Day on Sky Sports News and across our Sky Sports platforms.
A domestic-only window for deals between the Premier League and EFL then runs from October 5 and closes on Friday October 16 at 5pm. Follow all the news and analysis on SSN and across Sky Sports' digital platforms, including with our dedicated Transfer Centre blog.