But the former Scotland boss is optimistic of bringing in new blood in the next week.
Striker Dembele appeared favourite to move to St Andrew's in a £5million deal despite reported interest from West Ham and West Brom.
But McLeish said: "Dembele has got other options and he is choosing another option. His representative had told me that.
"It is a blow because we have worked hard on that one - but that's life."
As regards Juventus veteran Camoranesi, McLeish said: "I have always been a big admirer but negotiations became protracted and I had a further think.
"I decided it was not quite the way forward for Birmingham at this particular time."
McLeish, who has also been linked with Wigan's Charles N'Zogbia, added: "We are looking at one or two things and I'm confident we will have players in by the second game of the season rather than the first one at Sunderland."
Keeper Ben Foster is expected to be fit to face the Black Cats on Saturday despite suffering a back spasm which forced his withdrawal from the England squad to face Hungary.