The Premier League club were locked in deadline day negotiations with Porto for the midfielder, as well as centre-back Eliaquim Mangala, but will have to wait until July
Manchester City have agreed a deal to bring Porto midfielder Fernando to the club this summer, Goal understands.
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Fernando will now be out of contract in the summer and he has already agreed a contract with City.
Porto wanted £7 million for the Brazil-born midfielder's signature on Friday, but City were only willing to go up to £2m.
Manuel Pellegrini's side also failed with a bid to sign Fernando's club mate Eliaquim Mangala, with Porto again holding out for a large offer, this time worth more than £40m.
The France defender was unsure on a move in mid-season, but is open to offers this summer and City will once again attempt to strike a deal.
Porto had initially agreed a contract worth €200,000 (£165,000) per month with Fernando, which would have made him the best-paid player in Portugal.
The club were furious when he made clear that he wanted to joing Manchester City, however, and refused to do business in January for anything less than £7m.