The former Wimbledon champion has reportedly asked for US$130,600 for a one-year contract, which was deemed too much by the federation.
However, Ivanisevic will lead the team into battle on a one-off, unpaid basis in their first round match against Japan in February after Goran Prpic unexpectedly resigned last month.
Croatian officials also confirmed former French Open champion Iva Majoli as their Fed Cup captain.
Meanwhile, former world number 10 Martin Jaite has been named as Argentina's new Davis Cup captain.
Jaite agreed a two-year contract following the resignation of Tito Vazquez, who led the team to the final this year, when they lost to Spain.
"I am very happy. It has been my dream since I stopped playing and I am honoured by this appointment," said the 47-year-old, who will be assisted by another former player Mariano Zabaleta.
Jaite, the former coach of David Nalbandian and Gastion Gaudio, won 12 singles titles in his playing career.