Boris Johnson and the German chancellor spoke earlier about the proposals he had put forward to the EU - but the source said she made clear a deal based on them was "overwhelmingly unlikely".
Mrs Merkel's office said it would not comment on "private" conversations.
But the BBC's Adam Fleming said there was "scepticism" within the EU that Mrs Merkel would have used such language.
And the EU's top official warned the UK against a "stupid blame game".
President of the European Council Donald Tusk sent a public tweet to Mr Johnson, telling him "the future of Europe and the UK" was at stake
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