The Qatar club had revealed last Friday that Ecuador international Palacios had arrived in Doha to finalise the deal to take him to the Middle East.
They have now revealed that Palacios will not put pen to paper on a contract due to a failed medical.
The Qatar Stars League club tweeted: "Qatar Sports Club overlooked to sign with Honduras national team player "Wilson Palacios" because he didn't pass the medical examination."
Palacios joined Stoke from Tottenham almost three years ago, but has been hampered by injuries and appears to be surplus to requirements under Mark Hughes.
The 29-year-old made only 16 Premier League appearances for the club last season.
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