The Swedish international is in the final year of his current deal and negotiations over a new deal started more than a year ago.
But all attempts to persuade former Arsenal player Larsson to commit his future to Blues have so far drawn a blank.
McLeish said: "There is nothing doing at the moment with Seb's contract.
"We were hopeful we could get something done but it is up to Seb. He is now in a good position for himself if he wants to become a Bosman.
"But we will keep trying to entice him."
Larsson has been back to his best in recent games with his pinpoint crosses, although no-one could take advantage during Saturday's goalless draw with Wigan at St Andrew's.
McLeish said: "I think he had a great game on Saturday. His delivery from the wide area was great.
"Seb doesn't have to beat a man. He can get the ball around an opponent with his terrific curl on the ball.
"We are just desperate for someone to get on the end of those quality crosses."