Mari, 26, arrived in London on Saturday to complete a transfer to the Emirates but the defender is now set to stay at Flamengo.
Sources have told ESPN Brasil that Flamengo were opposed to the terms of Arsenal's proposal and Mari has already returned to Brazil after undergoing a medical in London.
He was expected to become the club's first signing since Mikel Arteta took charge but Arsenal will need to explore other options before the transfer window closes at the end of the month.
Mari, who was on Manchester City's books from 2016-2019, enjoyed a stint at Deportivo La Coruna before moving to Brazil. Despite never playing a single match at the Etihad, Mari is said to be close with Arteta.
Mari has played for Flamengo since July 2019, and was instrumental in the Rubro-Negro winning the domestic and Copa Libertadores crowns.