The source says, "Her demands got out of hand."
The singer-actress was said to be close to signing a deal to become a member of a revamped panel after both Simon Cowell and Ellen DeGeneres announced their departures from the program.
If People's source is correct, the network will now be looking into other celebrities to fill the judge's seat. One celebrity, Aerosmith's Steven Tyler, is already rumored to be close to a deal.
Fox nor a representative for Lopez could be reached for comment.
To read People's full report, click here.