The Brazilian-born stopper has long been on Newcastle's radar, and a move was close to being finalised, with a deal due to be concluded this week.
Douglas is available on a free transfer after leaving FC Twente, and an agreement with Newcastle was on the cards.
However, the 25-year-old will now not be moving to St James' Park and Sky Sports understands that the decision was made by new director of football Joe Kinnear.
Kinnear has wasted little time in stamping his authority on the transfer policy at Newcastle, as Douglas's representatives - who were due to fly to England on Thursday - have been informed the club will no longer be pursuing the deal.
It is understood Kinnear has already identified other defensive targets for the club to move for this summer.