1860 Munich had announced the deal with the Swede officially on Tuesday in a bid to improve their promotion chances.
"Sven-Goran Eriksson has informed the club after some time he took to consider that he will not be accepting the offer," it said in a statement.
Eriksson was to have been part of the training staff along with current coach Alexander Schmidt who would have stayed on in his position.
The 64-year-old, who has served as technical director of Thai club BEC Tero Sasana since September last year, has also managed AS Roma, Manchester City, Lazio, Sampdoria and Benfica among others.
"Since the first contact with the club in November there has been some time that has gone by and we all know how fast things move in the professional football," Eriksson said in the statement. "That is why I ask all those involved to respect my decision."
One of the founding members of the Bundesliga and the city's most successful club before the arrival of Bayern in the mid 1960s, 1860 have been reduced to a minor role, currently playing in the second division.
Eriksson coached England from 2001-2006, failing to win any trophies.