The British and Dutch companies, in a new release, blamed the collapse on their respective government stakeholders.
"We are obviously disappointed that we were unable to reach an acceptable agreement with our various government stakeholders," said BAE Systems Chief Executive Officer Ian King. "We believe the merger presented a unique opportunity for BAE Systems and EADS to combine two world-class and complementary businesses to create a world-leading aerospace, defense and security group."
Tom Enders, chief executive officer of EADS, expressed similar sentiments.
"I'd like to thank everybody who supported us, in particular all the colleagues at BAE Systems and EADS for all their hard work and dedication to this project in recent months. A special thank you goes to Ian King for his trust and partnership. It is, of course, a pity we didn't succeed but I'm glad we tried."
The government of Britain is the "golden" shareholder in BAE Systems, one of the 10 largest defense and aerospace contractors in the world.
The governments of France and Germany are stakeholders in EADS, which has subsidiaries such as Airbus, Cassidian and Astrium.
Neither BAE nor EADS went into specific detail as to the deal-breaking hurdles they met. Instead, they said talks with the relevant governments "had not reached a point where both companies could fully disclose the benefits and detailed business case for this merger."
Under the proposed merger agreement, which had moved beyond initial stages, special shares in the new group created through the merger would be issued to the three governments "to replace the existing U.K. government share in BAE Systems and the stakeholder concert party arrangements in EADS."
The companies now say that "it has become clear that the interests of the parties' government stakeholders cannot be adequately reconciled with each other or with the objectives that BAE Systems and EADS established for the merger."
"BAE Systems and EADS have therefore decided it is in the best interests of their companies and shareholders to terminate the discussions to focus on delivering their respective strategies."
Of concern to the British government was how the merger would affect the country's defense sector workforce, defense infrastructure and its defense relationships with other countries.
"BAE Systems and EADS operate highly capable and sensitive defense businesses in many countries including the U.K., the USA, France, Germany, Spain, Sweden, South Africa, India, Saudi Arabia and Australia," the Defense Committee of Britain's House of Commons said earlier this month.
"The merger of two such large defense contractors would have a significant and strategic impact on their relationships with U.K., U.S. and European governments. It could also radically alter the defense industrial base in these countries.
The committee had planned to have an inquiry into the proposed merger.
Unite, the largest labor union in Britain also raised concerns over the deal and sought assurances from the government that British jobs would be protected if the merger went through.
Lagardere SCA, a French multimedia conglomerate and a controlling shareholder in EADS, flat out opposed the deal.
"Despite its alleged industrial and strategic potential, this project has not demonstrated that it will create value for EADS," it said earlier this month. "Lagardere considers, at this stage, that the conditions of the rapprochement between EADS and BAE are unsatisfactory."
As they announced the end to merger negotiations, both companies insisted the plan was based on "sound industrial logic" and would have delivered tangible benefits to stakeholders.
Negotiators of the companies had already agreed in principle -- and subject to approval by their boards of directors -- to the mergers commercial terms; governance arrangements for the new group; a combined business strategy; a structure for a unified management and board of directors; and a near-term dividend policy.