Not-for-profit The Cardigan Arms Communities Pub Ltd was seeking to buy the pub after it was put on he market by current owners Greene King.
They raised £130,000 in a community share offer and were confident of meetommuning the £295,000 asking price with help from business partner, Leeds pub company Mood.
The community group was one of three bidders interviewed by Greene King.
The pub, which was built in 1896, is one of the UK’s top 250 heritage pubs and retains many of its original features.
Jim Brettell, co-foundfer of The Cardigan Arms Communities Pub Ltd, said: “Regrettably we have to confirm that attempts to buy The Cardigan Arms have failed as owners Greene King have agreed a sale to Kirkstall Brewery owner Steve Holt.
“The Co-op remains convinced that, having worked closely with the local community and our business partners Mood in developing an exciting and sustainable vision for this well-loved pub, our bid was the best and would have ensured the long-term future of a nationally-important heritage asset.
“Individuals come and go, companies get bought and sold and it’s regrettable that Greene King did not feel able to recognise both the quality of our bid and that it is only through active community involvement and ownership that a greater degree of protection can be provided for a pub like this.”
“The Co-op would like to express warmest thanks to all the many investors and supporters for their enthusiasm, hard work and campaigning effort over the last few months and can safely say that we all did our very best.
Mr Brettell said all investor pledges will not be drawn down and cheques will be returned
Kirkstall Brewery managing director Steve Holt said: “Our purchase of the Cardigan Arms will preserve this much-loved Grade II listed building for the local community.
“I look forward to bringing the same sense of pride in restoring and operating the Cardigan as we have to our current pub, the Kirkstall Bridge.”
A Greene King spokesman said: “After careful consideration, we decided to place the Cardigan Arms on the market and a sale has now been agreed.
“Having put the Cardigan Arms on the market earlier this year we’ve now agreed a sale to Kirkstall Brewery, a well-respected local business with a track record of sympathetically restoring and operating a nearby pub.
“The company is a good fit, being a craft brewer already based in the area. This decision ensures the future of the pub is safeguarded and we wish Kirkstall Brewery all the best for the future running of the pub.”