Modric has been Chelsea's number one transfer target all summer, with the west London club making an initial offer of £22 million for the player some 10 weeks ago.
Despite repeated assertions from Levy that the Croatian is not for sale, the Blues are thought to have returned with two more offers for the player - both of which have been rejected.
Modric has publicly declared that he wants to complete a "dream'' move to Stamford Bridge and even launched a scathing attack on Levy in order to try to force the Spurs chairman to let him go but Levy contacted Chelsea on Tuesday to make sure that his position was emphatically clear.
Redknapp said: "The chairman made another statement last night that he is definitely not going. He said he spoke to Chelsea and he told them, 'Let's put an end to this because it's not going to happen'.''
Redknapp, conscious of how important Modric is to the club's success, welcomed the move and urged the former Dinamo Zagreb player to commit himself to playing for Spurs.
Modric made himself unavailable for Tottenham's 3-0 defeat at Manchester United on Monday after telling his manager he was not focused enough to play, but Redknapp is growing tired of the situation and could play him against Hearts on Thursday in the second leg of the club's Europa League play-off.
The Spurs boss has praised Modric's attitude throughout the saga, but admits it may be hard to keep the player's spirits up for the rest of the campaign if his possible move to Stamford Bridge fails to materialise.
"I was chatting with (Spurs coach) Joe Jordan about it and he said to me that Luka is going to find it difficult,'' Redknapp said. "He said he'll be sitting there thinking every week that he could be winning the Champions League or win the Premier League and earning £100,000 more every week.
"That's the chance you have to take. We can all say he'll be all right, but nobody knows what's in his head. We don't know how he's going to feel but he's here and he has to get on with it now. He has to get on with it and be the great player he is.''
Redknapp will start a number of youngsters against Hearts given that his side are 5-0 up from the first leg, but said he would be looking to play Modric for most of the game if he is fit.
That would cup tie him for Champions League fixtures for Chelsea if he moves, but Redknapp does not care. "We are not in the Champions League so it won't affect us,'' Redknapp said. "I'm not bothered about anyone else.''
While Redknapp was busy batting away questions about Modric, he was also eager to stress the importance of bringing new players to the club. Spurs have endured a frustrating summer in the market, with free transfer Brad Friedel the only arrival of note.
Redknapp hopes to tie a deal up for Manchester City striker Emmanuel Adebayor before the start of next week, but reports that the former Arsenal man has undergone a medical on Wednesday are untrue.
Having seen his frontline fare poorly last season, Redknapp is under no illusions as to how good an addition the Togo international will be if his season-long loan goes through.
"(Manchester United defender) Rio Ferdinand told me that he and (team-mate) Nemanja Vidic rate him as the toughest opponent they've played against,'' Redknapp said. "If he can give them problems then he can give anyone problems.''
Out-of-favour Liverpool midfielder Joe Cole could also be a surprise addition to the squad.
"I signed him when he was 11 (at West Ham),'' Redknapp added. "He was the best young footballer I have ever seen. I would love the chance to work with him again because he is a talent and he is a great lad who loves football.''