Peel, who started all three Test matches against New Zealand in 2005, had been named in the Baa-Baas squad, but Premiership rugby have blocked the move.
"Premiership Rugby has no agreement with the Barbarians and no players will be released to play for the Barbarians [on 4 June]," read a statement issued by Premiership Rugby.
Sale have confirmed Peel is unavailable to the Barbarians.
"Dwayne Peel will categorically not play for the Barbarians. It is as simple as that," said Sale chief executive Mick Hogan.
"Dwayne has been told and understands the situation. Premiership Rugby has negotiated with Scotland and Italy for players to be released from 1 July as long as insurance is in place.
"As far as I am aware Wales have not responded to the offer."
Wales were not permitted to pick Peel as English clubs are only obliged to release players for World Cup preparation on 5 August, 2011.