A late deal is believed to have been in place to loan the Watford man, with an option to buy. But the player decided against dropping to the Championship and wanted to stay at Vicarage Road and fight for his place.
Wolves turned to Okaka after a big-money £10million deal for PSV forward Jurgen Locadia collapsed. It's understood that PSV head coach Phillip Cocu was opposed to selling the player unless a suitable replacement was found.
And with Wolves then unwilling to pay the extra cash the Dutch club then asked for, the move fell through even though the 23-year-old was already undergoing a medical in anticipation of an agreement being reached.
Sources suggest Wolves also enquired about long-time target Chris Martin, of Derby County, as well as ambitiously bidding to loan Chelsea forward Loic Remy, who instead moved to La Liga side Las Palmas, but 28-year-old former Roma and Sampdoria man Okaka was the one they came closest to.
Okaka joined Watford from Anderlecht a year ago in a deal said to be worth £10m, signing a five-year contract.
He scored five goals in 20 appearances last season, of which 11 were starts, and then netted in last month's opening-day 3-3 draw against Liverpool having started that game.
But Okaka hasn't featured since after the arrival of ex-Wolves youngster Andre Gray from Burnley, with Hornets boss Marco Silva preferring him and Richarlison in his first XI and then Isaac Success and Troy Deeney on the bench.
The lack of a striker deal meant that Michal Zyro and Donovan Wilson were unable to go out on loan, with the latter lined up to move to League Two side Port Vale.
Zyro could now get an opportunity to make his mark in Nuno Espirito Santo's first team squad.
Wolves had hoped to move out midfielder Prince Oniangue, who frozen out of Nuno's plans, but no viable option came in during the latter stages of the window.
The one player Wolves did sign on deadline day was Villarreal midfielder Alfred N'Diaye on loan.
It's believed Wolves have an option to buy N'Diaye at the end of the season – and also have options to buy their other four loan players; Diogo Jota, Willy Boly, Ruben Vinagre and Leo Bonatini.