The lockout puts the 2011-12 season in jeopardy.
The players offered their final proposal during a three-hour meeting, but the sides could not close the enormous gap that remained in their positions, from salaries to revenue sharing.
In a call with the labor relations committee on Thursday, Commissioner David Stern recommended that the first lockout since the 1998-99 season be imposed.
"We had a great year in terms of the appreciation of our fans for our game. It just wasn't a profitable one for the owners, and it wasn't one that many of the smaller market teams particularly enjoyed or felt included in," Stern said. "The goal here has been to make the league profitable and to have a league where all 30 teams can compete."
The league claims that 22 out of the 30 teams are losing money, totaling nearly $300 million in losses last season.
Despite the three-hour meeting and final proposal from the players - which NBA leaders said would have raised average player salaries to $7 million in the sixth year of the deal - the sides could not close the enormous gulf between their positions.
Union chief Billy Hunter said the two sides plan to meet again in the next two to three weeks.
All league business is officially on hold, starting with the free agency period that would have opened Friday. The NBA's summer league in Las Vegas already has been canceled, preseason games in Europe were never scheduled, and players might have to decide if they want to risk playing in this summer's Olympic qualifying tournaments without the NBA's help in securing insurance in case of injury.
And teams will be prohibited from having any contact with their players, most of whom won't be paid until a deal is done but insist they'll hang in anyway.
With this latest action, two major professional sports in the U.S. are locked out. The NFL locked out players in March.
In 1994, the NHL and MLB were idle from October through the end of the year. The NHL locked out its players from October 1994 until mid-January 1995 and reduced the 1994-95 season from 84 games to 48. MLB endured a 232-day strike from August 12, 1994 until April 2, 1995, which led to the cancellation of the entire 1994 postseason and World Series.
ESPN and the Associated Press contributed to this story.