The decision to end merger talks came after a meeting on Friday between French Finance Minister Bruno Le Maire and Couche-Tard's founder and chairman, Alain Bouchard, the sources said, speaking on condition of anonymity as the matter is confidential.
Couche-Tard and Carrefour declined to comment.
Earlier on Friday, France ruled out any sale of grocer Carrefour on food security grounds, prompting the Canadian firm and its allies to mount a last-ditch attempt to salvage the deal.
"Food security is strategic for our country so that's why we don't sell a big French retailer. My answer is extremely clear: We are not in favour of the deal. The no is polite but it's a clear and final no," Le Maire said.
Couche-Tard was hoping to win the government's blessing by offering commitments on both jobs and France's food supply chain and by keeping the merged entity listed in both Paris and Toronto, with Carrefour boss Alexandre Bompard and his Couche-Tard counterpart Brian Hannasch leading it as co-CEOs, one of the sources said.
The plan included a pledge to keep the new entity's global strategic operations in France and having French nationals on its board, he said.
Couche-Tard, advised by Rothschild, was also going to pump about 3 billion euros of investments into the French retailer which was working on the deal with Lazard.