The Chung-Ang University attacker has been linked with the German side for most of the summer but Dortmund general manager Michael Zorc said that a deal will not be happening.
Speaking to Westdeutsche Allgemeine Zeitung newspaper, Zorc said: "This transfer is off. The basic parameters of a deal are too adverse.
"Ryu Seung-Woo will not be joining our club."
Seung-Woo impressed a number of clubs during the FIFA Under-20 World Cup and Zorc is prepared to now look elsewhere in order to strengthen.
He added: "The transfer window is open until the end of August. We will keep our eyes open until then and consider further deals if possible."