Sky Sports sources understand Walter Smith has turned down the chance to become Wolves manager until the end of the season.
The former Rangers boss had been offered the chance to take over the Premier League strugglers for the remaining 13 games of the season.
But the 63-year-old Scot has rejected the opportunity as Wolves' efforts to replace Mick McCarthy, who was sacked last week, take another twist.
Alan Curbishley, Reading boss Brian McDermott and Brighton manager Gus Poyet have already been heavily linked with the vacant position at Molineux before distancing themselves from the role.
It is looking increasingly likely that McCarthy's former assistant Terry Connor will take charge of the Wolves team at Newcastle on Saturday.