Dyer was to complete a £6m move to Upton Park yesterday after he passed his medical in east London.
But the deal was dramatically delayed when the Magpies informed the West Ham board they were increasing the asking price to £8m for the England international.
The request was turned down and Dyer was informed the deal was off by Upton Park officials and that he had to head back to the North-East.
Dyer declined to comment last night.
The midfielder had his car and home targeted by angry supporters last weekend after the match with Juventus, and was not included in the squad for the friendly at Hull after Toon fans booed his every touch last Sunday.
Although Newcastle report the deal could still be revived if the Magpies lower their asking price, West Ham have replied "the deal is DEAD!"
Alan Curbishley was quick to rule out any deal saying: "In all of my years in football I have never experienced anything like this".
Yet there will be dancing in one particular street in East London, as West Ham supporter Brian Cass was one of many to e-mail NUMad: "There is such a thing as the power of prayer. I'd been praying that something would save West Ham from the folly of buying Dyer.
"All that dough for a guy who's hardly ever fit? A lucky escape, if you
ask me. So thanks to whoever it was up there who decided to scupper the
deal."
And to all West Ham fans out there .... you don't know how lucky you are!
"All the very best for the coming season", from the Toon Army.