The shutdown occurred because members of Google's privacy team complained to the company's bosses that they had not been told about the project, The Intercept reported.
The news that Google planned to re-enter China with a project known as Dragonfly — the company had a censored search engine in operation from 2006 to 2010, but pulled out when its servers were hacked by Chinese authorities — surfaced on 1 August in The Intercept.
Tuesday's report said the internal lack of communication about the project effectively ended work on the search engine.
After seeing what results were surfaced on Baidu by the search terms they had stored, the engineers looked at what would be shown if the same search terms were put into Google and compiled a list of the sites that would be need to be banned.
The privacy team at Google were unaware of the data access to 265.com and this led to a row between the executive team and the engineers who were then told that they could not use 265.com to continue developing Dragonfly.
One source said that the data from 265.com was integral to Dragonfly and with that source now banned, progress on the project had ground to a halt.
There have been numerous developments since the first reports about the project, with even US Vice-President Mike Pence calling on the company to scrap it.
Google has been silent about the project for the most part, but in October chief executive Sundar Pichai referred to it in public, telling a conference that what had been developed up to that point was "very promising".
When Pichai was asked what user information Google would share with Beijing authorities, he again avoided a direct answer, saying: "We would look at what the conditions are to operate … [and we would] explore a wide range of possibilities.”