The AFL Commission accepted on Monday the recommendation from football operations manager Mark Evans that no priority picks should be awarded under the League's 'special assistance rule'.
Melbourne has won just six games in the past two seasons and made a request for the Commission to receive an extra selection at this year's national draft.
However under criteria introduced in 2012 that gave the Commission discretion to determine whether a priority pick was needed, it was decided Melbourne was well enough placed to improve - as reported on AFL.com.au on Sunday.
"In coming to a decision, the AFL Commission considered a range of factors including the Melbourne Football Club’s recent performances, but also the opportunity the club has to make improvements in its operations - including its coaching, recruiting, administrative, cultural and welfare programs, as well as significant upside in young talent that is currently on the club’s list," Evans said.
Comment: Why Melbourne doesn't deserve a priority pick
Melbourne will also receive one-off funding of $1.45 million in a financial package it sought at the Commission meeting in June. The club will be given a grant of $1 million and $450,000 subject to the club raising a similar amount of money.
The club also has the ability to borrow an additional $500,000 on its facility, which the AFL has guaranteed.
Melbourne CEO Peter Jackson said the Demons believed they deserved a priority pick, but would respect the decision.
"The club believed its form in recent years warranted a submission for a priority pick," he said in a statement.
"The role of the AFL Commission is to make independent judgements on such requests and we accept their decision today not to grant the club a priority pick and move on.
"Whilst media reports of the funding amount have been considerably higher, the amount has met the club’s expectations and we acknowledge the AFL’s consideration and support.
"As previously stated, the funding will go to paying the one-off costs associated with significantly restructuring the club’s management structure including areas within the football department. This is a one-off funding package and will not be ongoing."
Melbourne has the No.2 selection in this year's national draft and 18-year-old Jesse Hogan, who was secured in the GWS mini-draft in 2012.
It has appointed new coach Paul Roos and is restructuring its football department.
The club appointed Glen Bartlett as president in August and is looking to restructure its board with a nominations committee including the AFL's general counsel Andrew Dillon sorting through candidates.
