It's believed the 21-year-old thought he had a greater chance of regular first-team football at Portman Road rather than Molineux.

Chief executive Jez Moxey tried hard to push a deal through for the 'No 10' specialist but he has opted for a third stint at Mick McCarthy's Tractor Boys.

The news means Wolves will continue with their existing squad for the rest of the season after opting not to make any signings before the 5pm deadline.

Out of four clubs including Watford and Fulham, Wolves were among the two favourites for the signature of the Wales international, who has had loan spells at Portman Road over the last two seasons.

Head coach Kenny Jackett said: "Jonny Williams is a player we made an enquiry for and expressed an interest in.

"He's a player who's done very well in the Championship and as such there was a lot of interest in him.

"Talks were ongoing at the top level - Jez Moxey was talking to Phil Alexander (Palace chief executive) about an emergency loan."

The news means Wolves are lighter on numbers after allowing Michael Jacobs and Sam Ricketts to join Blackpool and Swindon on loan respectively.

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Known as 'Jonniesta' for his physical likeness to the Spanish great, Williams has quick feet, is hugely skilful and said to be best played in the 'number 10' role.

But he has struggled throughout his career with niggling injuries.

Williams has played 44 league games for Palace and 18 in two spells at Ipswich, including five this season, which was ended by an injury against Watford on November 8 - his last game.

Meanwhile, goalkeeper Jonathan Flatt has joined Paul Cook's League One play-off hopefuls Chesterfield on loan for the rest of the season.

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Sedgley-based Flatt will compete with long-serving first-choice Tommy Lee at the Proact Stadium.

The 21-year-old, who played five games for Conference side Wrexham earlier in the season, could be in the squad for tomorrow's visit of Walsall.

Carl Ikeme's return to full fitness means Wolves still have three available keepers with Tomasz Kuszczak and Aaron McCarey, who was also earmarked for a loan move.