Cellino says on the official website that United are now pursuing other targets ahead of the transfer window closing next week (Tuesday September 1, 6pm).
Forestieri had been the subject of much media speculation after reports had heavily linked him with a move to Elland Road.
A fee had been agreed between the two clubs following successful negotiations, but United have opted not to take the deal any further.
“We decided on Tuesday that we would not be signing Forestieri, it was clear he didn’t have the right mentality needed to come to Leeds,” Cellino told leedsunited.com.
“I want players to show a hunger and desire to come here – but he did not.
“It was not about the money. A player could cost £3million, £5m or be a free transfer, but if their mentality isn’t right then I will not sign them for Leeds.
“Players like Wood, Adeyemi and Dallas are what we need here – they gave everything to show that they wanted to join Leeds. Look at Murphy, he showed a great commitment to the club.
"All our new signings showed that they really wanted to play for Leeds.
“We are building a team of players with the same attitude and the mentality needed to make Leeds successful again.
“Forestieri did not show that and we have moved on. We ended the deal on Tuesday and we are now looking at different players.”