Councillors from all parties looked at whether to have a designated wall in the city which graffiti artists and taggers could spray on without fear of being prosecuted.
But council chiefs have rejected the idea because they say it would give the wrong message. The neighbourhoods scrutiny board has published a detailed report on all kinds of graffiti, fly posting and tagging issues in the city.
Six councillors and officers worked on the report, called The Writing on the Wall, over an eight month period and visited other cities to see how they tackle the problem.
Bracknell Forest borough council in Berkshire has a scheme where local youth groups can decorate subways with the council's permission and Sheffield bosses said they preferred this idea rather than having a random graffiti wall.
Council Leader Jan Wilson said: "The murals in Bracknell Forest are not graffiti but proper works of art. If a youth group came forward with a proposal for a mural and it's in an appropriate place we would consider that. But we are not giving permission for a graffiti wall because there is a significant difference between graffiti and art."
The report was written following meetings with the police, Crown Prosecution Service, business community, transport companies, Sheffield Futures and graffiti artists themselves.
It aims to tackle graffiti in a number of ways, from more enforcement of the law to better education and prevention.
Coun Joan Barton, chairman of the scrutiny board, said: "The working group considered everything from a zero tolerance approach, which was supported by the majority of the public in a survey, right through to having some degree of tolerance in specific areas."
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