There has been no word on whether Madonna intends to appeal the ruling.
The news service described the judge as a witness not involved in Friday's court ruling, and the lawyer as another who was present at the time of the decision. Both the judge and the lawyer spoke on conditions of anonymity.
Madonna, 50, adopted her son, David Banda, now 3, from Malawi in 2008; she was granted custody and allowed to take him out of the country two years earlier. That adoption caused controversy, including claims that her application received special status because of her celebrity.
The singer, a single mother, was planning to adopt 3½-year-old Mercy James, whom she first met in an orphanage in 2006. Her other children are daughter Lourdes, 12, and son Rocco, 8.
When her Malawian lawyer, Alan Chinula, broke the news that High Court judge Esme Chombo had rejected her petition to adopt a Malawian toddler, an incredulous Madonna "kept wringing her hands," a source at Kumbali Lodge, where the pop star is staying, tells PEOPLE. Madonna, who filed her adoption papers on Monday, was not present in court.
At the hearing, the judge said child welfare officers are required to find suitable prospective parents and "not someone who just flies in and out." In terms of the child, "I think the welfare of Chifundo [African for 'Mercy'] will be better served if she grows within the environment of the culture of Malawi," she said.
The judge also said that because Madonna is already assisting other orphans, Chifundo will still benefit from star's generosity.
Do you think Madonna should have been allowed to adopt Mercy James, or do you agree with the judge's ruling?