It was reported last week that the actress would play Viper in the sequel to 2009's X Men Origins: Wolverine.
However, according to Collider, talks between Biel and studio Twentieth Century Fox have now broken down, and other actresses are being considered for the pivotal role.
Hugh Jackman will reprise his lead role as Logan/Wolverine, while Will Yun Lee and Brian Tee have been cast as villains.
Production on The Wolverine is set to begin next month in Australia and Japan.
Watch Jackman discussing The Wolverine with Digital Spy below: