The Department of Health has said Ulster University has yet to meet criteria to "demonstrate need and value for money" for a new medical school.
The facility at Magee, due to open in 2019, would be Northern Ireland's second medical school.
The department said it was providing assistance and is waiting on a revised business case from the university.
A university professor said they cannot recruit trainee doctors because of the Stormont impasse.
About 60 doctors were due to begin training in Londonderry next year.
In March, the university said plans for the medical school remained on track.
The Department of Health said they had provided "detailed and substantial feedback" to the university on its initial draft business case in January.
"The university has undertaken to address the many points raised and to provide the department with a revised version of their outline business case for further consideration," a spokesperson told BBC Radio Foyle.
"This is awaited."
The department also said the proposal needs to demonstrate need and value for money.
"Up to this point, neither of these criteria have been fulfilled regarding any desired increase to medical school provision," the spokesperson added.
Prof Hugh McKenna, Dean of UU's Medical School Development, said the absence of an executive to sign off on funding was delaying the project.
"We are not currently recruiting students at the moment for 2019, because it is not confirmed that it will be open," he said.
"We are still working with next September in mind. We still have a number of initiatives going forward to ensure the school will be shovel ready if a decision is made on funding."
The only medical school in Northern Ireland at present is at Queen's University in Belfast.
It is planned that student numbers at Magee will rise from an initial 60 trainee doctors to 120 students per year within five years of the school's opening.
A university spokesperson said it was "currently working through the feedback received from the department".
"The current unprecedented medical workforce shortage will continue to impact negatively on the care of local patients, their families and communities and is placing our healthcare sector at breaking point.
"Following two years of extensive research and analysis, we have developed an innovative proposal that will meet the demands of our healthcare system and the particular challenges in the North West."
The university has also announced the appointment of Prof Louise Dubras as professor and foundation dean of the School of Medicine.
A former deputy dean of Medical Education at King's College London, she will oversee the delivery of the medical school in her new role.