Discussions between Thorn and GEC started earlier this year - rumours were reported in March - and Thorn confirmed they were under way as recently as last month. However, they have proved unsuccessful.
Unions representing Thorn's defence employees expressed concern in July that a sale would lead to job losses. A spokesman for GEC suggested that up to 500 jobs - the business employs 4,300 - could be lost.
After discussions had dragged on unsuccessfully for months both companies yesterday announced they had stopped talking. Thorn still wants to sell the business, which makes naval radar and fuses for detonating missiles.
In July Thorn played down suggestions that it would receive pounds 160m for the business, but still left the City with the impression that it was hoping to receive more than pounds 100m.
The failure of the talks puts back Thorn's plans, under its chairman and chief executive, Sir Colin Southgate, to focus exclusively on music - it acquired Virgin's business last year - and rental operations, involving televisions and a range of other consumer goods including washing machines.
As well as the defence business, it wants to sell the civil electronics business, which makes security systems.
It recently sold the lighting side - the group's first business, set up by Sir Jules Thorn in 1928 - to Investcorp, the owner of Gucci and other luxury names.
The acquisitions would have made little dent in GEC's cash pile, which topped pounds 2bn at the last count. That includes GEC's share of money held by its associates.
GEC's shares fell 1p to 343.5p and Thorn EMI lost 10p to 935p on the news.