Friends of Pelican Park applied for the cash for a much-needed pavilion and changing facilities but the funding body said they were "not value for money."
Councillor Jan Hornby said she would like to see Sport England visit the site, which is used by 11 football teams, four cricket teams and thousands of children every year.
She said: "Everyone is very disappointed and we even had match funding of more than £200,000.
"People using the park only have two run-down Portakabins to get changes in.
They desperately need new facilities.
"We spent months putting the bid together and showed that plenty of people use the park on a daily basis.
"I was livid when we didn't get it because I feel they're not supporting grassroots sport here in Hull.
"But we will get one in the end."
