Dortmund were apparently open to agreeing a deal and told Man United they would begin discussions if a fee of £60m was offered.
However, United were only willing to go as high as £50m and talks went no further as a result.
It is a bizarre decision given the £36m fee United have agreed with Monaco for the transfer of 19-year-old Anthony Martial.
Reus is a proven world-class talent and one that would have significantly improved a squad which is crying out for a top forward.
United have money to burn thanks to a number of commercial deals and the price quoted for Reus was not unfair given the current climate in the transfer market.
Louis van Gaal will now have Wayne Rooney, Martial and James Wilson as his only real out-and-out strikers. Without a game changing signing like Reus, a Premier League title challenge is likely to be out of reach.