Reports on Tuesday, citing journalist Alfonso Partidor, claimed the former Manchester United winger had agreed a two-year contract with an option for a third season, with some outlets suggesting he was already travelling to Brazil to complete the move.
Palmeiras subsequently rejected the claims, with Brazilian journalist Luiz Carlos Largo reporting that the club denied any negotiation had taken place and that the story had originated from a fake social media account.
Sancho has been without a club since his Manchester United contract expired at the end of June, bringing a five-year association with the club to a close without Manchester United triggering a 12-month extension option that would have allowed them to recoup a fee.
The 26-year-old was previously linked with moves to Fiorentina and Roma over the summer, with those deals reportedly breaking down over his financial demands, and interest from Borussia Dortmund also failed to progress into a firm offer before the German window closed.
Should a move to Brazil eventually materialise, Sancho would link up with former United team-mate Andreas Pereira, who joined Palmeiras from Fulham last year, along with former West Ham forward Felipe Anderson.
For now, though, the England international remains without a club, having reportedly trained with 10th-tier side Flixton FC in recent weeks simply to maintain his fitness while a permanent destination is sorted out.
Sancho's career has stalled significantly since his £73million move to United from Borussia Dortmund in 2021, with loan spells at Dortmund, Chelsea and Aston Villa yielding little sustained form, despite winning the Conference League with Chelsea and the Europa League with Villa during those temporary stints. Whether the Palmeiras link resurfaces in a more concrete form remains to be seen, but for now his next destination remains unresolved.
Sky Sports had reported earlier in the window that Sancho was weighing offers from clubs in Europe, Saudi Arabia and the Middle East, without settling on a firm destination, while contact with Dortmund over a possible reunion remained ongoing until the German club instead moved for Arsenal's Ethan Nwaneri on deadline day.
The episode leaves Sancho's situation as one of the more unusual sagas of the window, with a viral but unverified transfer story briefly dominating deadline-day headlines before being firmly knocked down by the club at the centre of it.