The company applied several months ago to bring in the street-mapping feature showing 360-degree panoramic images of streets, monuments, mountains and rivers -- a service it first introduced in the US in 2007.
An interior ministry spokesman told AFP that Google's proposal had been rejected but added that a final decision would likely be taken later in the year.
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"We have rejected the plan by Google to expand its maps feature," the spokesperson said. "The final decision would come hopefully sometime this year," he said without elaborating further.
A Google spokesperson told AFP the government had "not indicated to us that the application has been rejected".
Since its launch in 2007, Google Street View has captured some of the world's most far-flung and scenic destinations, including the Amazon rainforest, Antarctica and Canada's Arctic tundra.
Street View is currently available in India at some tourist attractions, including the Taj Mahal in Agra and Delhi's Qutub Minar monument.
The Hindu newspaper said permission for the feature was denied after the Indian defence ministry raised red flags.
"The defence ministry said it was not possible to monitor the service once it was launched and it would be detrimental to national security," the paper quoted a senior government official as saying.
Some reports have suggested the delay is due to a controversial draft law, the Geospatial Information Regulation Bill, which proposes imposing strict new rules on the publication of maps.
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Maps are a highly sensitive issue in India, which has long-running border disputes with several of its neighbours, most famously over the divided Himalayan region of Kashmir.
India is a vast yet challenging market for Google, with only a quarter of its 1.2 billion citizens online.
Last year, Google's Indian-born chief executive Sundar Pichai visited the country and outlined plans to bring hundreds of millions of Indians online.
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