The news contradicts German press reports from three weeks ago that said the bank's offer of €800 million was to be accepted.
The bank's management board unanimously rejected the payment at a meeting on Thursday.
The decision was made following a review of the circumstances as well as internal and external legal advice it received.
Kirch's media empire extended to, at one point, 40 percent of the huge Axel Springer publishing house, a majority share of the television conglomerate ProSiebenSat.1, rights to the Bundesliga's football matches, Formula One and two football world cups as well as a range of film holdings.
Kirch, who died last year, sued Deutsche Bank for more than €3 billion, saying the then CEO Ralf Breuer had destroyed him in 2002 when Breuer, in an interview, expressed doubts about the creditworthiness of Kirch's empire.
Kirch blamed the bank for his empire's subsequent bankruptcy.
A court suggested that the two sides settle for €775 million, but Deutsche Bank rejected the idea. Kirch's heirs pursued the dispute and the two sides had reportedly agreed on the €800 million in early February, but that has since fallen through.
The magazine wrote that Kirch's widow and Deutsche Bank chief Josef Ackermann apparently agreed on the sum at the time, but there was no majority behind this among the board members. Thursday's vote confirmed that.