The former captain played just two games with the Demons last season after a crack was found in his navicular bone, seeing him endure an extended period on the sidelines.
The 23-year-old had been making good progress in his recovery before suffering a recurrence of the injury during the off-season, forcing the deal off the table.
Trengove, who showed so much promise during his first two seasons in the league after being drafted at pick number two in 2009, had hoped to make a fresh start to his AFL career at Punt Road but will now continue with his rehabilitation at Melbourne.
The Demons were fully prepared to let Trengove go, agreeing to trade him for pick 12 and give Richmond pick 23.
Melbourne football manager Josh Mahoney said the news was a big blow for Trengove.
"Jack had been progressing well from his navicular injury from earlier in 2014 with a CT scan eight weeks ago showing significant healing and was given the all-clear from the surgeon to progress to the next phase of his program," Mahoney told the Demons' website.
"Jack then gradually increased his loading which included a period of time on the de-load treadmill before two weeks of running outside.
"Unfortunately, Jack experienced some pain in the associated areas around his navicular whilst running.
"This was considered normal after not running for six months however further scans on Monday have unfortunately shown further damage to his navicular."
In regards to preliminary trade discussions: as Jack has not been medically cleared, he will remain at the Melbourne Football Club. 1/2
— Melbourne FC (@melbournefc) October 13, 20142/2: We will now seek further advice from surgeons for a plan moving forward so Jack can return to playing football.
— Melbourne FC (@melbournefc) October 13, 2014