Sky and Chrysalis agreed to the partnership back in March, before Global Radio bought Chrysalis this summer. It is understood Global's team were lukewarm about the venture.
In a statement, Sky and Global said: "The decision has been made for commercial reasons and follows the takeover by Global Radio of Chrysalis. Sky, Global and other third parties are exploring alternative options to launch a Sky News Radio Service."
A Sky spokesman said that Sky is currently in talks with other potential commercial partners to push the venture forward.
A spokesman for Ashley Tabor, Global's chief executive, said that having looked at the contract it was commercially unattractive, and Global was not prepared to make the necessary investment in this project.
Sky and Chrysalis had intended to put Sky News Radio on one of the slots on the second national digital radio multiplex, which will be launched in summer next year by 4DigitalGroup. In addition, Chrysalis' London AM station, LBC News 1152, would have become a London-focused Sky News Radio.
In the 50:50 joint venture, Sky would have produced the content and Chrysalis would have sold advertising.
Sky appointed David Ford as managing director of Sky News Radio only two weeks ago. It today said Ford would return to his previous role of Sky Sports News executive producer.
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