It was announced earlier this year that the authority had come to a "conditional agreement" with the UK firm to build a Luxe cinema at the £55 million site off Salop Street.
But council bosses have now confirmed that talks with Odeon are "not progressing" due to the impact of the coronavirus lockdown on the cinema industry.
Odeon employs 5,400 staff across 120 cinemas in the UK and Ireland. It has been forced to close all its sites for the second time this year due to the latest national lockdown.
Richard Lawrence, Wolverhampton's director of regeneration, gave an update on the Westside project to the stronger city economy scrutiny panel.
He said the authority would "continue to liaise" with Westside developer Urban & Civic and Odeon.
He added: "Everyone will be aware of the current state of play, certainly within the cinema world, so they are not progressing talks at the moment, Odeon.
"But we continue to work and we meet on a monthly basis with Urban & Civic to progress the Westside scheme and will continue to so so."
Odeon is one of a number of cinema chains to draft in corporate finance experts to help weather the impact of the shutdown on its finances.
The cinema industry has been plunged into crisis by the pandemic, with film studios delaying blockbuster releases and in some cases releasing them on streaming platforms instead.
Cineworld is to close 128 sites in the UK – including Wolverhampton's Bentley Bridge – while AMC, the parent company of Odeon, has said it is trying to raise new capital after warning there was a "significant risk" it could run out of money by the end of the year.
Work on Westside was due to start in August for a planned opening in summer 2022. It has been delayed due to the pandemic.
Once completed it will feature mini golf, 10-pin bowling, a multi-storey car park, restaurants and shops.
Council bosses have mooted an extended version of the scheme featuring hotels and a ‘football quarter’ centring around a revamped Molineux.