Coalition governments are the norm in The Netherlands, and the arduous negotiations are part of Dutch political life.
"We have tried everything to narrow the gaps, and they have become smaller... but we just couldn't succeed," veteran Dutch politician Edith Schippers told reporters.
She had been leading the effort to forge a common agenda between outgoing Prime Minister Mark Rutte's Liberal Party (VVD) and three others.
The VVD, which won 33 MPs in March elections, has been in talks with the conservative Christian Democratic Appel (CDA) and the progressive Democracy Party (D66), which both won 19 seats.
But to reach a majority in the 150-seat lower house, the negotiations also included the environmental leftist party GroenLinks, whose young, charismatic leader Jesse Klaver boosted his party's MPs from four to 14.
From the beginning, doubts were raised about whether Klaver would be prepared to make the necessary compromises, especially those demanded by the CDA.
Rutte described the failed talks as "a pity," adding: "We wanted them to be successful, but we didn't succeed. We decided together that it just wouldn't work."
Immigration proved the main stumbling block, Rutte said, adding there had also been differences over climate change and income levels.
Asked about the specific reasons for the failure, Klaver reiterated that "we have tried compromises. Sometimes it works but this time it did not."
CDA leader Sybrand van Haersma Buma said he was deeply disappointed.
Had the talks succeeded, the new coalition would have had a total of 85 MPs -- a comfortable majority especially when faced with the far-right anti-Islam party of controversial MP Geert Wilders, who with 20 MPs makes up the largest party in the opposition.
Wilders crowed in a Tweet: "Very good news. No GroenLinks," adding his Freedom Party "is fully available."
Rutte however has vowed not to work with Wilders's anti-Islam anti-EU party even though it came second in the polls.
So it is likely, Rutte will now turn to one of the smaller parties, such as conservative Christian Union which won five seats. That would give them a very narrow 76-seat majority.
Schippers told reporters at a surprise press conference that she has already informed King Willem-Alexander of the failure of the talks, and would prepare a report to go before the new parliament.
It would now be up to parliament to decide what happens next, she added.
Coalition governments are the norm in The Netherlands, and the arduous negotiations are part of Dutch political life. In 2012 it took Rutte 54 days to put together a government -- a relatively short time. The longest it took was 208 days in 1977.