Speculation about the proposed merger first surfaced in February when Channel 4 and Five admitted to holding talks after initially getting together to discuss plans to combine their airtime sales houses.
The decision to call off talks came after a board meeting between Channel 4 senior management and Five's shareholders this week.
According to the two broadcasters, while the benefits of a merger would have been great, the complexity of the deal, needing to have a change in law in the case of the publicly owned Channel 4, was what finally killed it.
A Five spokesman said: "The board of Five has announced today that discussions on a potential merger with Channel 4 have ended.
"Although the benefits of a merger would have been significant, the shareholders of Five have come to the conclusion that the complexity of combining a commercial and a publicly owned entity, and the constraints on the likely structure, would have been too great and have therefore ended the discussions."
Five and Channel 4 said they had decided to make the announcement to end the speculation that had accompanied the talks and to allow the two companies to concentrate on the development of their respective businesses.
In March this year, it was reported that state-owned Channel 4 was seeking government approval to allow it to merge with rival Five. The sale of Channel 4 by the government could have raised as much as £2.5bn.
Together Five owners RTL and United Business Media saw the merger as part of Five's future. Gerhard Zeiler, the RTL group chief executive, said the need for a partner for Five had become more pressing since the ITV merger and the emergence of three dominating forces within UK television -- the BBC, BSkyB and ITV plc.
"The situation on the British television market now is that three major groups emerged with the BBC, BSkyB and now ITV," Zeiler said. "Those are the 800-pound gorillas and everybody else has to think about what they are going to do."
It was then reported in August that the driving force behind the merger was Channel 4 chairman Luke Johnson, who saw a merger as the only way to allow the broadcaster to compete effectively against the newly merged ITV.
However, later that month Channel 4 chief executive Andy Duncan played down reports of the merger during the Edinburgh TV Festival.
Last year, Channel 4 had a turnover of over £770m and made £45m profit.
The broadcaster also increased its programme spend by £20m, after strong advertising revenue performance, which has resulted in a 5% year-on-year increase in audience share.
Five is also making its mark on the terrestrial market and has witnessed a steady increase in revenue and audience figures since its launch and is set to make profits of £12m this year.
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