The English veteran, whose loan spell ends next month, was tipped to remain at San Siro thanks to his consistent displays with the Serie A giants of late.
However, Galaxy never showed any willingness to sell Becks and eventually announced that 'Milan failed to make a satisfactory monetary offer' for the 33-year-old before the MLS transfer deadline on Friday.
"Los Angeles Galaxy midfielder David Beckham, the subject of rampant speculation for weeks to be joining AC Milan as part of a permanent transfer, will not be staying with the Serie A club after all," a Galaxy statement read.
Galaxy boss Bruce Arena also reaffirmed that his side will retrieve Beckham on March 9th.
"Friday's deadline imposed by Major League Soccer Commissioner Don Garber regarding a resolution of Beckham's potential transfer to AC Milan has passed and we did not receive an acceptable offer for the player," said Arena.
"As a result, David remains an LA Galaxy player and we look forward to having him back with the club starting 9 March."
Beckham is expected to start for the Rossoneri when they take on leaders and defending champions Inter Milan in the perennial crunch derby on Sunday.