The US has blocked the £880m sale of money transfer firm Moneygram to China's Ant Financial, the digital payments arm of Alibaba.
It is the highest profile Chinese deal to be rejected by Washington since Donald Trump came to power, BBC reports.
According to Moneygram and Ant Financial, regulators overseeing foreign investments in the US refused to support the takeover on the grounds that the geopolitical environment had "changed considerably" since the merger was announced last year.
The latest move is a blow to the ambitions of Alibaba's billionaire executive chairman Jack Ma, who had promised President Trump that he would create a million US jobs.
Alibaba, which owns Ant Financial, saw the US market as a way to expand overseas in the face of fierce domestic competition from the likes of Tencent's WeChat.
But in a joint statement, Ant Financial and Moneygram said they had abandoned the deal "following the inability of the companies to obtain the required approval for the transaction from the Committee on Foreign Investment in the US, despite extensive efforts to address the Committee's concerns,"