United have had a £27million bid rejected as early reports suggested that the Brazilian club first demanded £5million more than their initial bid.
The 20-time Premier League champions had sent chief scout Jim Lawlor to broker a deal but Sao Paulo chiefs had rejected any offers made by the Old Trafford club. The Brazilian club had also rejected several bids made by Chelsea, Real Madrid and Inter Milan.
However, United were keen to sign the 19-year old midfielder who is currently in London for the 2012 games and is gearing up to face Team GB.
"Manchester United made a very important offer of €35m (£27m) but they would need to produce a little more," Sao Paulo director Marco Aurelio Cunha was quoted as saying in DailyMail.
For us, only Neymar is worth more. After him is Lucas, and we would not want to sell for less than this sort of value.
"We do not need the money. The Brazilian economy is good, television pays us and we cannot complain. For us, it is still better to have a good player than lots of money in the bank," he said.
United, who are on a pre-season tour of South Africa, have already signed Japanese star Shinji Kagawa from Borussia Dortmund for £17m and young sensation Nick Powell.
Meanwhile, United are turning their attention towards Real Madrid midfielder Nuri Sahin. The 23-year old German-born Turkey international has been frustrated due to lack of first-team football at the Bernabeu.
With a £20 million price-tag on the midfielder, United are likely to consider a loan move for the Turkish international.
Reports also suggest that United are favourites to sign Arsenal's want-away striker Robin van Persie for £20million as rivals Manchester City and Italian giants Jeventus monitor the situation at the North London club.