On Monday, the government announced proposals for 14 new garden villages.
Plans for a garden city in the Black Country were revealed in March, but it will not receive the same funding.
Bosses behind the Black Country plans said work was already progressing and they were "always exploring different funding streams".
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The Department for Communities and Local Government (DCLG) confirmed a combined bid from Dudley, Sandwell, Wolverhampton and Walsall "was unsuccessful in bidding for garden village/town status".
However, a spokesperson added the Black Country Garden City scheme "is not reliant on DCLG funding".
Sarah Middleton, chief executive of The Black Country Consortium, which is behind the project, said about 500 had been built under the scheme so far, with thousands of homes planned to be built annually and millions of pounds of funding already secured.
She said the consortium was "always exploring different funding streams" and the DCLG's decision would not affect its plans.
It is claimed the ambitious Black Country Garden City project will see the biggest regeneration of brownfield sites in the country, spanning over 31 different areas.
The design would see pockets of housing built across the boroughs of Dudley, Sandwell, Walsall and Wolverhampton.
Development is due to be completed by 2025.
Ms Middleton said smaller sites - including some derelict and developed land - would be developed instead of focusing on creating a new town in one area.
"We want to... make sure we're building out from the existing network of villages and towns across the Black Country," she said.
"We wouldn't particularly have one big site, and we actually don't think that would be suitable for a Black Country interpretation [of a garden city]."
Work is progressing on a scheme to build more than 45,000 new homes, bosses have said, despite a bid for funding being rejected.