Manchester City were willing to offer £50million plus a player they valued at £15million for the Algeria international.
But the Foxes ultimately asked for £80million cash which the Premier League leaders were not willing to pay.
It is understood that the winger missed training on Tuesday to try to force the switch and faces a battle to reintegrate himself at Leicester.
Some players are understood to be unhappy with how Mahrez has conducted himself and it is uncertain when he will play for the 2016 Premier League champions again.
A ‘friend’ of Mahrez told Sky Sports on Wednesday the 26-year-old felt down and upset at his treatment by the club.
He missed Wednesday’s 2-1 defeat at Everton with boss Claude Puel hopeful of welcoming Mahrez back into the fold, but remained cautious.
“All the players, all the staff, will help him to come back with a smile, to enjoy his football with his team-mates because he is a great player, fantastic, a good man and he likes football,” he said after the game.
“Of course, for the moment, I did not speak with Riyad, but perhaps there is a lot of disappointment.
“We will see when we can manage all this for the future.”
Cliff Ginnetta, chairman of the Leicester City Supporters’ Club, is confident Puel can restore calm and get the best out of Mahrez once again.
Ginnetta, who praised the club for sticking to its guns, said: “It must be very hard for him. People are saying that he’s said things and he’s probably not said any of those things and it’s people putting two and two together and getting five.
“It’s a very difficult situation for him and maybe it needs the manager to get his arm around him and people who know him the best to have a word with him and sit him down and sort things out with him.
“But they are a very tight-knit squad, so I don’t think getting him back into the squad will be very difficult.”
Mahrez asked to leave the Foxes last summer and his stance has not changed, although neither has the club’s.
They do not want to lose him but should Mahrez, who signed a new four-year contract in 2016, leave it will be on their terms.
Leicester will hold out for what they believe is his market value with Philippe Coutinho moving to Barcelona from Liverpool for £142million and Virgil van Dyke going to Anfield for £75million in January.
Mahrez recently moved agents and is now with Coutinho’s representative Kia Joorabchian.
He won the PFA Player of the Year and scored 18 goals when the Foxes clinched a shock Premier League title two seasons ago.
Liverpool captain Jordan Henderson showed he had lost none of his bite after a month on the sidelines and believes his team-mates responded well to him barking orders again.
The England international made his first start since suffering a hamstring injury on December 22 in Tuesday’s comfortable 3-0 win at Huddersfield.
In his absence manager Jurgen Klopp used different captains in six successive matches but now the 27-year-old is back wearing the armband his team-mates have a familiar voice leading them on the field again.
“I’ve been out for a little while, so it was nice to be back out on the pitch,” he said.
“At times I can shout at one or two people but I think everybody responds well.
“We’re a great set of lads, togetherness is really good. On the pitch, we just need to do what we need to do to win.”
The midweek victory was the perfect response to back-to-back defeats in the Premier League and FA Cup.
However, they face a real test on Sunday as fifth-placed Tottenham, just two points behind in the table, visit Anfield.
“The results and performances over the previous two games are something we have been disappointed with,” he added.
“It was a good game for us to come and show we can put it right. I thought we did that, but we’ve got a long way to keep improving, keep getting better.
“We’ve got a big game on Sunday against Spurs who are a very good side.
“They’ve got fantastic players and a fantastic squad of players so, yeah, we’re really excited to see what we can do over these last few months of the season.
“It will be a big test but one I think we are ready for and we need to make sure that we put in performances like we did at Huddersfield on a regular basis.”
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With £430million splurged on transfers, there are some eye-catching new foreign recruits among them.
Here’s a look at the ones worth keeping an eye on over the weekend.
PIERRE-EMERICK AUBAMEYANG | ARSENAL | 10.5M
It’s been a disruptive season for him at Dortmund but he’s still second top scorer in the Bundesliga with 13 goals. He comes at a good price for an Arsenal striker who’s certain to start. With Henrikh Mkhitaryan and Mesut Ozil feeding him passes, he’s bound to get a few opportunities.
LUCAS MOURA | TOTTENHAM | 8.0M
As good as Tottenham are, they have lacked genuine pace from their wingers and Moura’s arrival certainly brings just that. He scored 19 goals for PSG last season and has only dropped down the pecking order due to Neymar and Kylian Mbappe’s arrival last summer. He could be the new must-have 8m midfielder.
AYMERIC LAPORTE | MANCHESTER CITY | 5.5M
Pep Guardiola wasted no time throwing Laporte into the first eleven. With John Stones injured, he started alongside Nicolas Otamendi and kept his first clean sheet in a 3-0 win over West Brom. But whether he’ll be a starter when Stones and Vincent Kompany are both fit remains to be seen.
GERARD DEULOFEU | WATFORD | 6.0M
Under Roberto Martinez in the 2013/14, Deulofeu enjoyed a successful loan spell with Everton, prompting the club to sign him full-time in the summer of 2015. If he can replicate the same form, he’ll be more than useful at Watford and comes at an attractive price as well.
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