Kevin Blackwell now wants to keep hold of the 28-year-old defender. Duberry had been set to leave after a contract termination had been agreed.
A complicated transaction, it involved Duberry having to agree a settlement for termination of his Elland Road contract while seeking guarantees that the club's payments to him would continue even if Leeds went into administration.
Wolves chief executive Jez Moxey said: "It's disappointing and frustrating Leeds have suddenly made this decision but things like this happen in football.
"We haven't yet heard from the player himself that he wants to stay at Leeds," Moxey told the club's official website. "But if this is the case then we'll move on to pursue other targets."
However, Blackwell told BBC Radio Leeds: "Michael expressed a desire to stay at Leeds. We want that sort of attitude to step back up to the Premiership."
"What we were saving on wages was negligible. It was going to cost us as much to replace him."