Bernabeu bigwig Florentino Perez fancied firming up his long-term interest in Dembele during the summer transfer window.
But, according to Don Balon, head coach Zidane vetoed a potential deal.
Zidane is a huge fan of Karim Benzema and would not sanction any arrivals that left him vulnerable to the exit door.
But he is now regretting that decision after seeing Dembele join Barcelona.
Nou Camp chiefs were desperate for a new winger after losing Neymar to Paris St-Germain for a world-record £200m fee.