The defending champions were keen on getting the 20-year-old midfield ace in their squad for the campaign but he has been denied said document despite a personal plea from Pep Guardiola.
Luiz signed a five-year deal with City last summer, with the English side taking him off Vasco da Gama's books, but he was loaned to the Etihad outfit's sister club Girona for the season.
Guardiola, having missed out on Jorginho, was hoping to bolster his squad by bringing the Brazilian in. He is understood to be disappointed and upset given the manner in which the situation has unfolded.
The Premier League title holders sent a video plea - featuring Guardiola, Brazil boss Tite and former Arsenal midfielder Edu - to the FA in an attempt to secure a permit for the youngster.
The City boss is reported as having explained that he wanted the young South American to be part of his contingent for this year's campaign after missing out on targets Jorginho and Fred, who have joined Chelsea and Manchester United respectively.
Guardiola also revealed that he had decided against spending a huge sum to augment his midfield and instead looked to bring last season's loanee in as a backup option alongside Phil Foden.
Tite also weighed in, insisting that Douglas would become a 'superstar' playing under a manager like Guardiola and would get into the Brazil squad as a result, while Edu branded him 'brilliant.
Pep confirms Douglas Luiz has been rejected a work permit and seems less than pleased about it.— City Watch (@City_Watch) August 10, 2018
"It's so difficult to understand. I am so sad and disappointed for Douglas - he could have helped us. He showed many good things in the training sessions."
The pleas, however, fell on deaf ears as Douglas only made 15 La Liga appearances for Girona last season, and the request was rejected.
City now have no choice but to send the player out on loan again. And, with the transfer window closing on Thursday, no one else can be brought in until January.