Sergio Cragnotti, the Italian club's owner, faxed Arsenal vice-chairman David Dein to inform him that unless the Gunners lowered their asking price of pounds 22m, the deal was dead.
Reports had indicated that Lazio may have been willing to compromise by offering Arsenal a 15 per cent share of any future transfer revenue from Anelka. But it would seem that the massive payments required by the striker's agents on top of any transfer fee have restricted the Serie A club's flexibility.
Cragnotti is understood to have told Dein in his fax: "The offer of pounds 18m cannot be modified due to budgetary restrictions and on account of the heavy commission that Lazio would have to pay to the agents of Nicolas Anelka."
An official spokesman for Cragnotti revealed: "The offer of pounds 18m is our last offer and we are now waiting for an answer from Arsenal, who have asked for pounds 22m. The ball is now in the hands of Mr Dein. Only if he changes his mind on the price is it possible for talks to start again."
Meanwhile, in an interview with the French sports newspaper L'Equipe on Tuesday, Anelka made it clear that he regarded his move to Lazio as a done deal. Juventus have also been linked with the French striker and he admitted they were a "great club", but added: "I don't want to go there. I've made my choice."
Anelka told the French newspaper that he had made an irrevocable decision to leave England after Arsenal beat Wimbledon 5-1 without him on 19 April. "The manager rested me. The next day the British papers said that Arsenal didn't need me," he said.
Asked whether it was truly only his dislike of the British press which had persuaded him to go, Anelka said: "Yes. Just that. They started as soon as I arrived. Even when I played well, they criticised me."
The young striker accused Arsenal of acting hypocritically when they protested that Real Madrid had spoken to him without their permission. "Arsenal officials did the same thing with me when I was at Paris," he said. "It wasn't very intelligent [of them] to make a fuss about that... and it did no good."
Anelka, however, paid a warm tribute to the Arsenal manager, Arsene Wenger. "I am where I am because of him... he always helped me when I doubted myself. He always did what he promised he would do."
He said that, for this reason, he had delayed telling Wenger that he was definitely leaving until last Friday. "I was uncomfortable about it... He was a bit disappointed but he has always been very understanding with me."
He said he left England without any regrets. "In England, I learned a lot about commitment. Technically, the standard is not very high but they make up for it physically."
Reports had suggested that Juventus were interested in making a massive bid of pounds 22m plus pounds 10m-rated striker Thierry Henry. But the club's managing director, Luciano Moggi, has now made it clear to the Italian media that Juventus have no plans to bid for Anelka.
Even pounds 18m would represent a massive increase on the pounds 500,000 which the Gunners paid Paris St Germain for the 20-year-old Frenchman two years ago. Whatever the figures involved are, with some reports putting the total fee offered by Lazio - including the agents' cut - at pounds 20m plus a 15 per cent cut of any future sale - and Arsenal's demand at pounds 26m, the two sides still appear to be at least pounds 4m apart.