The American company have supplied the Old Trafford club since 2002 when they replaced Umbro in a lucrative deal which has cost Nike around £24million a season.
Although some reports at the weekend suggested a new record-breaking deal was set to be concluded, Nike revealed on Tuesday that they had opted to walk away from negotiations, claiming United were demanding too much money.
A Nike statement read: "Manchester United is a great club with passionate fans. We are proud to have partnered with them for the last 12 years and will continue to sponsor the club until the end of the 2014/15 season.
"Any partnership with a club or federation has to be mutually beneficial and the terms that were on offer for a renewed contract did not represent good value for Nike's shareholders.
"We look forward to a successful final season with the club."
Some reports have suggested Adidas are now in pole position to step in and clinch a deal which could see the club earn £60million a year from 2015.
Nike's original deal was worth £303million, with extra income from a profit share agreement from merchandise sold worldwide.
On Monday, United unveiled their new home kit for the 2014-15 season - which will be the last designed by Nike and the first to bear the logo of new sponsor Chevrolet.
United announced they would be entering a seven-year agreement - worth a reported £53million per season - with the US car giant from this summer back in 2012.
Incoming manager Louis van Gaal will head to the United States after the World Cup to pick up the reins for the first time as United begin their overseas tour on July 18.