The Brazilian's move to the Ligue 1 side hinged on a deal being struck between Milan and Manchester City striker Carlos Tevez.
However, talks between the two parties broke down on Thursday.
"It's over. He hasn't arrived because we were waiting for an agreement between AC Milan and Manchester City for Tevez," said Ancelotti.
"It's the player's decision then. We wanted to bring in a player to improve the team. We have time until the end of the window [to find someone else]."
The French side have now been linked with a move for Internacional's Leandro Damiao.