"It wasn't really developing into anything, and wasn't going to, so they decided they were better as friends," a source told Us. "There was no chemistry, and it felt contrived."
The pair met on the set of the upcoming romantic comedy "Valentine's Day." Lautner was spotted attending two of Swift's concerts in Chicago, and the teen stars reunited three weeks later at a Los Angeles Kings hockey game.
Each has hinted about their relationship on separate "Saturday Night Live" hosting gigs.
The relationship officially ended shortly after Lautner flew to Nashville for Swift's birthday party on Dec. 13, a friend of the singer told Us.
"He liked her more than she liked him," the source said. "He went everywhere he could to see her, but she didn't travel much to see him."
Swift was previously romantically linked with Joe Jonas, who dumped her during a much-commented-upon 27-second phone call in 2008.
Swift's rep had no comment. Lautner's rep could not be reached.