The 23-year-old will remain in Ligue 1, with the midfielder's agent suggesting his prospects of making the France squad could be harmed if he left for Newcastle.
The 23-year-old has been targeted by the Magpies following Yohan Cabaye’s departure to Paris Saint-Germain, while Toon boss Alan Pardew revealed on Thursday that negotiations were “ongoing”.
But Grenier’s agent, Frederic Guerra, claims the midfielder could potentially harm his chances of making France’s World Cup squad by moving to the Premier League during the January transfer window.
“It is not easy to say no to a big club like Newcastle, but Clement has decided to stay at Lyon,” Frederic Guerra told Le 10 Sport.
“With the new tactical system that Remi Garde is deploying, Clement is trying to make his game even richer and he is showing that in his matches.
“With six months until the World Cup would a departure from his current club be a good idea? I do not think so at all.
“Also, Lyon are on their way back up and Clement does not want to leave when things are getting better. He does not want to abandon them midseason."
Guerra also insists Newcastle’s valuation of Grenier - around half of what the club received for Cabaye - is not an accurate representation of the Lyon midfielder’s true worth.
“Finally, the conditions of his departure would not have allowed Clement to flourish. He would have arrived at Newcastle - not as Clement Grenier - but as Yohan Cabaye’s replacement,” Guerra continued.
“I have the utmost respect for the quality of Cabaye, who deserves everything that has happened to him. However, as the agent of Clement Grenier, I also have to ask: Is Clement really worth half of Yohan Cabaye?
“All these reasons led us to decline the offer of Newcastle, the conditions of the deal did not seem fair to me vis-a-vis Clement.”