The Toon were in talks with Lyon over the purchase of the France international, who narrowly missed out on the national squad that impressed in the World Cup.
Pardew has tried and failed to sign numerous targets already this summer and the £16million stumbling block on this deal has proved fatal.
Lacazette is set to sign a new three-year deal at Lyon after discussions between his agent and the club early this week.
Liverpool were also keen on Lacazette after Luis Suarez’s departure to Barcelona but both they and Newcastle will need to look elsewhere.
“We are on track to realise a three-year contract extension,” Lyon president Jean-Michel Aulas said.
Newcastle are now set to try and persuade last season’s loanee Loic Remy to return to St James’ Park however the QPR man is desperate for Champions League football.