"It's not true that the owners killed the deal, the deal was never discussed at the Board of Governors meeting and the league office declined to make the trade for basketball reasons," league spokesman Mike Bass said.
Yahoo Sports reported that NBA Commissioner David Stern killed the trade after several owners complained. Citing anonymous sources, Yahoo reported Dallas Mavericks owner Mark Cuban was one of the most vocal owners upset about the deal, done the same day as the end of the lockout, which was supposed to restore competitive balance in the league.
The proposed deal would have sent Lamar Odom from the Lakers to New Orleans and four-time All-Star Pau Gasol from the Lakers to Houston.
After it fell through, Paul simply wrote, "WoW," on his Twitter page.
The NBA's decision sets up an awfully awkward Friday.
A person familiar with the negotiations told The Associated Press that Paul will report to the Hornets on Friday. And Gasol and Odom were expected to report to the Lakers' first day of training camp under new coach Mike Brown.
Odom, too, took to Twitter to share his feelings: "When a team trades u and it doesn't go down? Now what?"
Owners and players ratified a new collective bargaining agreement Thursday, the final step to ending the five-month lockout and allowing training camps and free agency to open Friday.
There was hope in small markets like New Orleans that after the lockout it would be easier for teams to hold on to their stars. Had the deal had been approved, one of the NBA's biggest stars from the league-owned small-market Hornets would have moved to one of the NBA's largest, richest markets.
The Hornets have been owned by the NBA since last December, when the league bought the club from founder George Shinn.
A person familiar with the negotiations told The Associated Press that the framework for a deal had been in place earlier Thursday. The person spoke on the condition of anonymity because the talks were supposed to remain confidential.
The Rockets also had agreed to send forward Luis Scola, shooting guard Kevin Martin, point guard Goran Dragic and a first-round draft choice to New Orleans.
Odom, the NBA's sixth man of the year last season whose marriage to Khloe Kardashian and E! network reality show put him at the center of Hollywood's love affair with the Lakers, sounded devastated to be leaving his adopted hometown in an interview on 710 ESPN radio earlier Thursday. Odom has spent all but one season of his NBA career with the Clippers or Lakers.
The NBA's move also quashed an attempt by the Lakers to retool their roster after their back-to-back title reign ended last spring with Dallas' second-round playoff sweep.
There is, however, still the question of Orlando's Dwight Howard.
The Lakers are widely reported to be interested in acquiring the Magic center Dwight, another All-Star expected to move before signing a long-term deal. Unlike Paul, Howard has made no secret of his affection for Los Angeles.
If the Hornets are unable to figure out a trade for Paul, he would be able to opt out of his current contract after the upcoming season.
Speaking earlier Thursday, Hornets president Hugh Weber said the franchise has been preparing for months for the possibility that Paul would resist signing an extension in New Orleans, a move that would leave the Hornets with the choice of trading him or simply letting him walk in free agency at the end of the season.
"We've been preparing for this moment for over a year, and it's not like we were surprised or caught flat-footed," Weber said. "This is not a surprise. This is not something where we've been sitting around waiting to see what would happen. We've been managing this and taking control of the situation as best we can and we're going to have a team that we believe achieves that objective of making this community proud."
Paul, 26, averaged 15.8 points and 9.8 assists last season.
Despite the lockout and uncertainty over Paul's future, fan support has been building in New Orleans, where the team has advertised their season-ticket drive as an effort to lure a permanent local buyer who is committed to keeping the team in Louisiana.
The Hornets have increased their season ticket base from a little more than 6,000 last season to 10,019 as of Thursday afternoon.
Paul was drafted by the Hornets fourth overall out of Wake Forest in 2005.
He has been selected to the Western Conference All-Star squad the past four seasons and also was a member of the United States' Olympic gold medal-winning team in Beijing in 2008.
AP Sports Writer Greg Beacham in Los Angeles contributed to this report.