It is now expected Fernandez - who is valued at £120m by Chelsea - will stay at Stamford Bridge for the 2026/27 season.
It is also understood the verbal acceptable terms and conditions that were made to Fernandez's representatives for potential interested clubs at the end of May are now off the table.
- Transfer Centre LIVE! | Latest on YOUR PL club!
- Premier League fixtures & scores | FREE PL highlights▶️
- Got Sky? Watch Premier League games LIVE on your phone📱
- Not got Sky? Latest Sky Sports deals or stream PL games with no contract📺
City are interested in the midfielder, who shared a strong relationship with Enzo Maresca when he was Chelsea boss.
The 25-year-old has six years left on his contract.
Is the Fernandez transfer saga over?
There is no guarantee that Man City will not still bid for Fernandez before the transfer window closes on September 1.
Developments with Rodri could be key. Barcelona have had two bids rejected by City for the Spain captain. City do not want to sell him and want Rodri to sign a new contract, with his current deal up next summer.
But if Barcelona were to offer a fee acceptable to City, then City may look to move for Fernandez, despite Chelsea's insistence they will now not sell the Argentina international in this window or the winter window.
Sky Sports News' Alan Irwin said: "This was a deadline Chelsea imposed themselves and Man City were unlikely to play ball with a club imposing their own transfer deadlines.
"The fact Chelsea want £120m for his services may well make City depend on other factors - such as whether Rodri leaves the football club.
"City boss Maresca is a big admirer of Enzo Fernandez. He understands exactly what he could bring to the club.
"But if the transfer is to come off is very much dependent on if Rodri leaves Man City for Barcelona.
"Rodri is back in the country and meeting up with Maresca on Friday afternoon."
Bouaddi also a City target
Man City have targets in mind for any player who departs and they are in ongoing talks with Lille for Morocco midfielder Ayyoub Bouaddi. They have already signed central-midfielder Elliot Anderson for £116m from Nottingham Forest.
Chelsea have a high valuation for Fernandez but they signed him for around £107m from Benfica in the 2023 winter window.
Relations between Man City and Chelsea are strained after the acrimonious manner of Maresca's departure from Chelsea.
Man City paid Chelsea £17m in compensation to appoint Maresca this summer. He had resigned with three-and-a-half years to run on his contract at the end of 2025 after being sounded out about succeeding Pep Guardiola last autumn.
Chelsea chose to impose a deadline to avoid the distractions that arose when Maresca stood down with his shock exit announced by the club on New Year's Day.
Their view is that interested clubs have had the best part of two months to make an approach for Fernandez. They want new manager Xabi Alonso and his players to be able to focus on the new season ahead.
Fernandez was dropped by Chelsea for two games in April after he admitted he would welcome living in Madrid.
The player and his agent also apologised for his comments. They had been seeking improved terms at Chelsea.
Real Madrid released a statement earlier this summer denying they would make an attempt to sign Fernandez.
