The Argentine superstar made a bombshell U-turn and abandoned his attempts to leave the Spanish giants because he didn't want a legal fight with them.
The news is a huge blow to City and Pep Guardiola, who had been confident of luring Messi to the Etihad in what would have been one of the biggest signings in football history.
But Messi is staying put against his wishes and he said: "I wasn't happy and I wanted to leave. I have not been allowed this in any way and I will stay at the club so as not to get into a legal dispute. The management of the club led by (Josep) Bartomeu (president) is a disaster.
"There was another way (out) and it was to go to trial. I would never go to court against Barca because it is the club that I love. Barça gave me everything and I gave it everything. I know that it never crossed my mind to take Barça to court.
"Now I am going to continue in the club because the president told me that the only way to leave was to pay the 700 million clause, that this is impossible, and then there was another way it was to go to trial.
"I would never go to court against Barça because it is the club that I love, which gave me everything since I arrived, it is the club of my life, I have made my life here."
Messi, 33, stunned football when he demanded to leave Barca last month in the wake of their humiliating 8-2 defeat to Bayern Munich in the Champions League.
Messi claimed he could leave the Nou Camp on a free transfer and had set his sights on a reunion with former boss Guardiola.
But fuming Barca chiefs insisted he had a release clause in his deal worth €700m and threatened to take him to court after getting the backing of La Liga.
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City chairman Khaldoon Al-Mubarak had been hoping Messi was prepared rip up his contract and let a tribunal decide his transfer fee.
But following crunch talks between Messi's camp and Barca, Messi has backed down and agreed to remain with them for at least one more season.
City are 16/1 with bookmakers to secure a deal this summer.