Denayer attended the game and was expected to complete his move to the Istanbul giants today but Galatasaray were unable to reach an agreement with City.
NTV Spor report that City were reluctant to give Galatasaray a buy-out clause option as part of the loan.
Denayer flew back to England in the morning and failing to complete his move.
The 20-year-old defender has also been closely linked with a move to Ligue 1 giants Marseille.
The Belgium international scored six goals and setup two assists in 44 appearances for Celtic in all competitions last season.
Galatasaray dropped into 13th place with just one just 1 point after two games following the defeat to newly promoted Osmanlıspor.
The Lions take on Konyaspor next at the Konya Torku Arena in the Süper Lig.