Mbappe has been linked with a £154 million move to La Liga and has expressed interest in taking on a fresh challenge at the Bernabeu.
However, as the transfer window closes, negotiations between the two European giants have fallen down.
Real Madrid made three proposals for the World Cup-winning Frenchman, who has a contract that expires in 2022 in Paris.
Real Madrid's initial £137 million bid for Mbappe was quickly rejected by the Ligue 1 giants, but Los Blancos returned with a £145 million offer.
Real Madrid made a last offer of £145 million, plus £9 million in add-ons, after their second bid was rejected.
However, Real Madrid's third bid was also rejected once more by Paris Saint-Germain, and talks between the two clubs have finally come to a stop, according to Telefoot.
Following the Champions League draw, PSG president Nasser Al-Khelaifi addressed the Mbappe situation.
He stated, "We've both been very clear, I've been very clear, and we've both been very clear. The club's position is clear. We are not going to change or repeat it."
Meanwhile, PSG's sporting director Leonardo revealed to RMC Sport that Mbappe has informed the club that he wishes to join Real Madrid, but stressed that the Spanish club must increase their offer.
"We believe the offer is a long way from what Kylian represents now," Leonardo said.
"We owe Monaco a portion of this money as well, and we believe the offer is insufficient. It's a fraction of what we paid for him."
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