The Demons, who came 17th this year and won just two games, after coming 16th last season, had applied to the AFL to award them draft assistance.
That bid was opposed by all 17 other clubs.
The AFL on Monday decided not to award the Demons, or any other club, an extra draft selection.
They took into account that Melbourne were already making improvements off the field, including the recent appointment of in-demand premiership coach Paul Roos.
"In coming to a decision, the AFL Commission considered a range of factors including the Melbourne Football Club's recent performances, but also the opportunity the club has to make improvements in its operations - including its coaching, recruiting, administrative, cultural and welfare programs - as well as significant upside in young talent that is currently on the club's list," AFL football operations manager Mark Evans said.
The AFL also announced they would fund Melbourne, who are restructuring their whole football department, an extra $1.45 million.
Of that, $1 million is a straight grant, while the club must raise an equal amount to match the other $450,000, the league said.
The Demons would have qualified for a priority pick automatically, under rules in place until last year, for winning four or fewer games in consecutive seasons.
But it's now up to the AFL Commission to determine whether a club is eligible.