The popular 50ha park was to be the site of Everton's new stadium. Campaigners have been fighting the plans and had called for a community asset transfer to allow the park to be managed by local residents.
Liverpool City Council and Everton have now confirmed they are no longer looking at Walton Hall Park as a potential site, instead considering two brownfield sites within the city boundary.
In a joint statement they said the proposed scheme at Walton Hall Park "was always an ambitious one". The regeneration scheme would be heavily reliant on retail investment, despite most current retail investment focusing on city centres and larger district centres, not on out-of-town developments like this would have been, they explained.
Mayor Joe Anderson said: "Most people will be aware that I did give a commitment to Everton to support a potential scheme at Walton Hall Park with the aim of regenerating the area and creating new jobs.
"However, through the work that the club and the council have done, we have concluded that effectively building a new village in North Liverpool with lots of retail space is a step too far in this current economic climate.
"On the subject of the park itself, I can now say that the park will remain a park and will be designated as such in our Local Plan which will be out for consultation this summer."
Anderson, who was reelected in May, has pledged to make Liverpool "one of the greenest cities in Europe".
Robert Elstone, chief executive of Everton FC said: "Our work with the council, particularly over the last few months, has been positive and progressive and whilst our work evaluating the alternatives is at an early stage, we are hopeful that the new sites provide us with a much more straightforward, deliverable opportunity to build a new stadium."