Fox has been trying to buy the 61% of Sky that it does not now own.
Britain's competition regulator told Rupert Murdoch his $15 billion (11 billion pounds) takeover of Sky was not in the public interest and would be blocked unless there was a way to prevent the tycoon from influencing the network's news output.
The CMA added the decision was not due to "a lack of genuine commitment to meeting broadcasting standards in the UK".
The CMA said in a statement on Tuesday that it believes the deal would be "against the public interest" because there needs to "be a sufficient plurality of persons with control of the media".
Rupert Murdoch's £11.7bn bid to take full control of Sky has been provisionally blocked by the United Kingdom regulator.
"The Transaction might make it more likely that Sky News and the newspapers owned by News Corp could take a similar approach on specific topics or issues, push certain stories, or downplay others". But the media mogul is a divisive figure in Britain, and a previous bid for Sky was withdrawn amid the hacking scandal that engulfed his British newspaper division.
Fox could now be forced to agree a spin off of Sky News in order to get the Competition and Markets Authority's seal of approval.
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The watchdog has extended the deadline for its final report to May 1 2018, in part due to the "exceptional volume" of submissions over the deal.
"The CMA has provisionally found that if the deal went ahead, as now proposed, it is likely to operate against the public interest".
The CMA also concluded that Fox had a "genuine commitment to broadcasting standards in the UK" and was established in the country.
"Regarding plurality, we are disappointed by the CMA's provisional findings".
It added: "We will continue to engage with the CMA ahead of the publication of its final report in May".
In a statement this morning, CMA said that if the deal went ahead, the MFT would have "too much influence over public opinion and the political agenda".
Anne Lambert, chairwoman of the CMA's independent investigation group, said: 'Media plurality goes to the heart of our democratic process. Disney is hoping to buy the asset from Murdoch at a later date. It is very important that no group or individual should have too much control of our news media or too much power to affect the political agenda.