Raffael will not be joining Bayern Munich, according to Borussia Monchengladbach sporting director Max Eberl.
Raffael, 30, had been linked with a transfer to Bayern, with Express reporting the Bundesliga champions were preparing a €15 million offer.
He had been tipped to strengthen Bayern's central attacking midfield and compete with Mario Gotze for a spot in the starting lineup.
Raffael made a lasting impression on the Bayern executives when he scored twice in Gladbach's 2-0 win at the Allianz Arena in March.
In total he scored 12 goals in 31 Bundesliga matches and another two in Gladbach's Europa League campaign.
"Raffael will definitely play for Borussia next season," Eberl told Bild.
The Brazilian said he has begun preparing for next season, when Monchengladbach will be in the Champions League, adding: "I have already started to run on the beach.
"It is my dream to play against Barcelona. To play against great footballers like [Lionel] Messi or Neymar would be really special to me."