The "Wolf of Wall Street" filmmaker, who signed on to develop the film in 2009, wanted Al Pacino to play Ol' Blue Eyes and Robert De Niro to portray his Rat Pack sidekick Dean Martin.
Frequent Scorsese collaborator Leonardo DiCaprio was also linked to the role, but he subsequently revealed he had no plans to appear in the film.
The 74-year-old director now said he has shelved plans to develop the feature film over objections from the Sinatra family, reported Rolling Stone magazine.
"We can't do it. I think it is finally over. (The estate) won't agree to it. Open it up again and I'm there!"
"Certain things are very difficult for a family, and I totally understand. But, if they expect me to be doing it, they can't hold back certain things. The problem is that the man was so complex. Everybody is so complex - but Sinatra in particular."
In 2009, Sinatra's daughter Tina signed on to the project as an executive producer, but she was reportedly unhappy with the way the script highlighted the darker side of Sinatra's career - concentrating on his alleged associations with Mafia gang lords during his 1960s hey-day.
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