Hammers boss David Moyes wanted to bring in Emerson, 28, at left-back.
The Irons were close to agreeing a fee with London rivals Chelsea following an opening bid of £13million.
However, wage demands and difficulties with the full-back's representatives have caused West Ham to put an end to talks for now, says The Sun.
There remains a slim chance that the east Londoners could go back in for the Italy international, who spent last season on loan with French side Lyon, but the club are now considering other options.
Moyes is keen to add an upgrade on Aaron Cresswell at left-back having already made six signings so far this month.
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