The Canaries had made Lampard their top target to replace Daniel Farke and were confident earlier this week of striking a deal.
However, the ex-Chelsea boss has now decided against a move to Carrow Road.
Lampard, who took Derby to a Championship play-off final before he took the job at his former club, has been heavily praised for his work developing young players throughout his managerial career.
The likes of Mason Mount, Fikayo Tomori, and Reece James were all given opportunities by the Blues legend.
But, with the 43-year-old out of the running for the job at Norwich, they will now have to look elsewhere.
Which could mean the door could now open for former Aston Villa boss Dean Smith, who was also reportedly a target for the Premier League's bottom club.
Norwich have won just five points so far this season - the same as Newcastle - but sit in last place due to their goal difference.
They sacked ex-boss Farke after a win against Brentford last weekend, which gave them some hope in their bid for Premier League survival.
And, after initially targeting Lampard, they could now turn to Smith, who was sacked by boyhood club Villa on Sunday.
Whether the former Walsall and Brentford boss would be willing to jump straight back into football, less than a week after being relieved of his duties at Villa Park, remains to be seen.
Sky Sports reported on Thursday that Norwich were 'impressed' by Smith's interview at the club, after 'boasting an in-depth knowledge of the squad, playing style and culture of the club'.
And the Canaries will be hoping to sort their current managerial situation out as quick as possible, as they take on Southampton at Carrow Road next Saturday.