The Cairo giants were eager to have Michel as their boss for a second stint after sacking Reiner Hollmann earlier this month.
Zamalek chairman Mohamed Amer recently revealed that the club were close to finalizing talks with the former France, Morocco and Ivory Coast manager.
But negotiations eventually did not materialize, Amer said early on Friday.
“Michel asked us to pay a release clause in his contract with South African club Mamelodi Sundowns,” he told FilGoal.com.
“But we turned down his request.”
FilGoal.com learned that Zamalek had to pay Sundowns $180,000 to name Michel as their new coach.
Despite the latest setback, the White Knights are expected to announce the appointment of a new manager in the coming few days.
Ahmed Refaat is currently in charge of Zamalek on a temporary basis. Under his guidance, the team lost twice and won once in the Egyptian League.