Manager Gus Poyet revealed on Friday afternoon that the Potters had given the Black Cats something to think about by increasing their initial offer for the 23-year-old midfielder.
However, it's understood the deal has now fallen through, despite claims a fee had been agreed between the two clubs.
The news will come as a relief to Poyet, who admitted the Potters' efforts to prise the former Middlesbrough and Wigan midfielder from his grasp had taken him by surprise.
The Uruguayan said: "We had an offer yesterday which was very simple to say no.
"There were rumours during the week, but somebody needed to make an offer. They made an offer and it was not good, see you later.
"Nothing happened during the day, so I thought, 'They are not coming back' and if they came back, it had to be really big. And they came back."
The Cattermole saga unfolded as Liam Bridcutt completed his £2.5million move from Brighton to the Stadium of Light, and Poyet will now expect the pair to compete for the holding role in his midfield.
He said: "I was looking forward to having him and Liam Bridcutt sharing that position and fighting for a place. We need leaders on the pitch in that central position."
Cattermole was unlikely to be available for Saturday's derby trip to Newcastle anyway because of a calf injury, and that could mean a debut for the newcomer at St James' Park.