The reports surfaced right before 11:00 when the 34-year old was set to become an unrestricted free agent after playing for the Rockets last season on a one-year, $2.9 million contract.
Then Nene realized that the original four-year, $15 million offer wasn't even legal by the CBA's Over-38 rule, and the agreement fell through.
Houston isn't allowed to offer Nene a four-year deal because of the newly implemented Over 38 rule.
Nene will turn 35 in September. After the Rockets' trade for Chris Paul depleted their bench depth, he'll serve as a valuable backup to starting center Clint Capela.
The 6-foot-11, 250-pound Nene averaged 9.1 points and 4.2 rebounds in 67 games (eight starts) as a reserve in his first season with the Rockets last season.
After the first deal was pulled, Nene planned to talk to other National Basketball Association teams during free agency that opened Saturday. He averaged 10 points per game in the playoffs including a 28-point effort in game 4 of the Rockets series against Oklahoma City. "They brought the young Nene back".