Communities Secretary Sajid Javid said he is "very disappointed" but the local decision will be respected.
The seven councils which make up the North East Combined Authority voted 4-3 against the devolution deal earlier this week.
The Tees Valley Combined Authority have confirmed their support for regional mayors and devolution after their north east counterparts voted to reject the government's devolution deal.
The Tees Valley Combined Authority is made up of five local authorities: Darlington, Hartlepool, Middlesbrough, Redcar and Cleveland and Stockton. They've voted to approve the government's devolution offer.
Yesterday the North East Combined Authority rejected the deal after a split vote between the seven councils which make up the body.
A spokesperson for Tees Valley Combined Authority said they would be pushing for further progress:
“The Order creating a Mayoral Combined Authority for the Tees Valley has been approved by parliament. A further consultation on the powers and governance arrangements was conducted over the summer, and the responses are now being compiled.
The Tees Valley councils have demonstrated over many years their commitment to a strong partnership for growth and jobs. We expect Ministers to deliver on their commitments to devolution and will continue to push for further progress.”
The NECC writes to Sajid Javid urging him to continue to work on North East devolution
Northern Powerhouse Minister, Andrew Percy, has been reacting to the news that the North East devolution deal has been taken off the table.
Communities Secretary Sajid Javid has confirmed that plans for a devolution deal covering the North East are now off the table.