Arsene Wenger has been chasing Lemar all summer but after making a last-ditch attempt to sign him, he has pulled the plug.
Balague tweeted: “As it stands, Arsenal pull out of Lemar negotiations.
“So Alexis, much to his pain, stays. Will there be more twists? #DeadlineDay.”
Manchester City have been chasing Sanchez all summer and had made a £55m bid for the Chile international today.
Lemar is currently on international duty with France who take on Holland tonight in a World Cup qualifying match.
Arsenal have made just two summer signings to date with Alexandre Lacazette and Sead Kolasinac joining the fold.
Alex Oxlade-Chamberlain has left for Liverpool, while Kieran Gibbs is now at West Brom.
After the Gunners got demolished by the Reds at the weekend 4-0, Wenger was expected to move in the transfer market.
But with his pursuit of Lemar seemingly over, Arsenal look set to have a quiet evening before the 11pm deadline.