Wellington Phoenix's A-League future has been thrown into deeper doubt with Football Federation Australia (FFA) declining the club's request for a 10-year licence extension.

The FFA said the Phoenix, whose current licence expires at the end of the current season, still have the option of requesting a four-year licence until the conclusion of the 2019/20 season.

But it would not consider extending the club's future in the competition beyond that, with FFA chief executive David Gallop saying the board's decision was made "in the best interests of Australian football".

"FFA has carefully evaluated the role and contribution of the Wellington franchise in terms of game development, player pathway, commercial factors, broadcast rights and the long-term strategic outlook," Gallop said in a statement.

"The application for a 10-year extension to the licence does not meet the requirements we see as fundamental to the future growth of the Hyundai A-League."

The decision follows protracted negotiations between the FFA and Phoenix owners Welnix, with the latter party pushing for a more stable 10-year arrangement.

It also comes after the club were forced to play down reports last week they could be kicked out of the league next year in favour of a third Sydney team.

Fairfax Media reported on Thursday that FFA is examining the possibility of replacing the Phoenix with a new team in Sydney as early as next year, in line with its stance that there are no short-term plans for expansion.

Sydney's Sutherland Shire has been named as a prospective area to house a new team, with the report claiming meetings involving the FFA, Sutherland Shire Council, NRL club Cronulla and the Sutherland Shire Football Association have already been held.

The Phoenix moved quickly last week to dismiss any talk of being dropped, with general manager David Dome saying they had been told they were still in the A-League's plans but admitted there was no timeline on the "fluid situation".

The FFA last year extended the length of the licences of all nine Australia-based clubs until 2034.

The Phoenix declined to comment on whether they planned to apply for a four-year licence.

"The Welnix ownership group and Phoenix board will consider the situation in due course and no further comment will be made at this time," the club said in a statement.

AAP