The tie-up between Australia's largest oil and gas company and its second-largest would have created an $80 billion LNG powerhouse.
But Woodside said on Wednesday it wouldn't move further on the possible transaction.
The company didn't provide details, with chief executive Meg O'Neill saying only that Woodside always conducted due diligence and only pursued transactions that provided value for shareholders.
"We continue to be disciplined in our approach to mergers and acquisitions and capital management to create and deliver value for shareholders," Ms O'Neill said.
"While the discussions with Santos did not result in a transaction, Woodside considers that the global LNG sector provides significant potential for value creation."
Following Woodside's announcement, Santos confirmed the merger talks, first publicly revealed in early December, had ceased.
"Following an initial exchange of information, sufficient combination benefits were not identified to support a merger that would be in the best interests of Santos shareholders," Santos said.
Early Wednesday afternoon, Woodside shares were up 1.7 per cent to $32.83 while Santos shares had slid 5.0 per cent to $7.475.
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