"They wanted their household to be entirely independent of Buckingham Palace, but were told 'no,'" a royal source reportedly told the outlet.
"There is an institutional structure that doesn't allow that kind of independence. The feeling is that it's good to have the Sussexes under the jurisdiction of Buckingham Palace, so they can't just go off and do their own thing."
Prince Charles has also denied the request.
Harry and Meghan have been married for 9 months.
Their request would have allowed Meghan to focus on the charity initiatives that she worked on prior to the royal wedding.
Last week, the palace has officially announced that Meghan Markle and Prince Harry have their split royal households from Prince William and Kate Middleton.
Watch more on the shock split.
“This long-planned move will ensure that permanent support arrangements for The Duke and Duchess’s work are in place as they start their family and move to their official residence at Frogmore Cottage,” a statement from the palace said.
William and Kate’s office will remain in Kensington Palace, where they live with their three children.