It was revealed in July that Waverley was in the running to buy the aerodrome in a bid to get delayed plans for up to 6,000 new homes at Dunsfold Park back on track.
But this week Waverley’s Lib Dem leader Paul Follows revealed the council was not selected as one of the preferred bidders.
He said: "While it’s disappointing not to have our bid taken forward, it was important to ensure that it reflected our cautious approach to risk and a clear financial strategy which togetherâ?¯struck the right balance for our council taxpayers whilst seeking to secure the future of the site in line with our Local Plan.
"Should the council have been successful, we would have been seeking a partnership arrangement with at least one commercial organisation to deliver the 2,600 new homes allocated in the Local Plan.
"We are still eager to explore what opportunities there are for us, particularly with delivery of the 30 per cent affordable housing on site.
"We want to work with a new owner in whatever capacity we can, to ensure the planned high-quality and sustainable new village is built at Dunsfold aerodrome."
The knock back comes after the council’s opposition Conservative group mounted stiff opposition to the idea.
And at the council’s executive committee meeting on Tuesday, Tory group leader Cllr Stephen Mulliner went on the offensive again.
He said council leaders hadn’t given opposition councillors enough opportunity to discuss the bid before a fractious, behind closed doors full council meeting at the Farnham Maltings in July.
He added the bid, the "most significant financial project this council has ever considered", was "extremely rushed" and called on the council leadership to "build a consensus" through more "active discussion" in future .
Responding, Cllr Follows said the bid deadline was set by Dunsfold Park owners Trinity College Cambridge, leaving very little time for discussion with members.
But despite this, he added, councillors had the opportunity to debate the bid in an exempt discussion at full council, and at an informal members briefing.
Cllr Follows added: "It was very important for us to put forward a bid that was credible and well researched, to demonstrate how serious we are about having a role in the future of Dunsfold.
"Doing so has proven its worth, as we have clearly indicated to the development community our commitment to deliver these homes and the high standard we want to achieve and have subsequently received preliminary approaches from a number of the other bidders."
Dunsfold Park is of strategic importance to the council and is expected to contribute a significant proportion of the new homes needed in the borough over the coming years.
Outline planning permission for 1,800 homes was granted in 2018, with the borough’s Local Plan containing provision for up to 2,600 homes on the site.
Sale negotiations with other bidders are on-going.