Tettenhall station, which would sit in Pendeford between Wolverhampton's main station and Bilbrook, has been unsuccessful in a bid for Department for Transport cash.
It is one of 14 rail projects in the West Midlands to miss out in the latest round of funding from the £500 million 'Restoring your Railway' Fund (RYR).
Other unsuccessful bids include the Stourbridge Dasher light rail service between Stourbridge and Brierley Hill, and a scheme to reinstate rail sidings at the former Ironbridge Power Station.
A scheme to open the line between Lichfield and Burton to passenger trains has also been knocked back in this round of funding.
It comes after plans for a new railway station in Aldridge were moved forward after Transport for West Midlands was handed £150,000 from the RYR fund to develop a business case.
The idea for Tettenhall Station was first mooted by Sir Gavin Williamson and has been taken forward by West Midlands Mayor Andy Street and city MPs Stuart Anderson and Jane Stevenson.
Mr Anderson, MP for Wolverhampton South West, said it was disappointing to miss out on funding but vowed to "keep fighting" to get the scheme off the ground.
He said: "It would have been great to get the funding secured at this stage and move forward with the station.
"However, I will not be put off and will keep pushing to get the station."
The proposed Tettenhall station would sit on the line between Wolverhampton and Shrewsbury.
It is one of 13 stations planned by transport bosses in the region under a £300m scheme to increase access to rail travel.
The Government launched the RYR fund in January 2020 to deliver on a manifesto pledge to open more lines and stations as part of its levelling up agenda.