Spokesman Norman Black said the two companies agreed to terminate their negotiations. He did not elaborate.
The move was expected by many analysts after DHL decided it would no longer offer U.S. domestic-only air and ground services.
Though it had said its international shipping to and from the U.S. would continue, the cutbacks in its U.S. operations meant any deal with UPS would have been greatly scaled back.
"We have not been able to come to a conclusive agreement that is acceptable to both parties," DHL said in a statement.
DHL spokesman Jonathan Baker said that for now his company will continue to use its existing providers, principally ABX Air and ASTAR Air Cargo, to provide the airlift services UPS had wanted to take over.
UPS shares fell $1.27, or 2.3 percent, to close at $54.65 in Friday trading.
The venture as originally envisioned was expected to last up to 10 years. Atlanta-based UPS had said the contract with DHL would mostly involve the transport of DHL packages between airports in North America -- not the pickup or delivery of DHL packages to customers.
DHL said it has decided to move U.S. hub operations for its international business from Wilmington, Ohio, to the Cincinnati/Northern Kentucky International Airport to save money. DHL will reactivate its automated sorting facility at the airport and finish moving there by mid- to late summer.
At last count, there were about 5,000 people working at the Wilmington airport, down from about 8,000 a year ago.