It is understood the former Black Cats boss was offered the job on Wednesday, but rejected the chance to return to the Stadium of Light dugout.
Keane was linked with a stunning return to the Wearside club following the departure of Lee Johnson.
The ex-boss was sacked after an embarrassing 6-0 defeat to Bolton, with Keane tipped to replace him and lead Sunderland pursuit for promotion back to the Championship.
However, talkSPORT sources have confirmed the Irishman is no longer under consideration for the role after he pulled out of the running.
talkSPORT understands that former Norwich and Preston boss Alex Neil will take the job.
Sunderland are yet to confirm Neil's impending arrival but are expected to do so ahead of Saturday's trip to AFC Wimbledon.
He was sacked by Preston in March last year but had previously guided Norwich to promotion to the Premier League.
The Black Cats currently lie in fourth place in the third tier, just two points adrift of the automatic promotion places, although they have played four games more than Wigan in second, with leaders Rotherham a further nine points clear.
Keane is believed to have had two interviews with the club and was even offered the position on Wednesday.
But the 50-year-old is said to have turned down the chance to seal a return to the dugout after more than ten years since his last managerial post.
The news will come as a blow to frustrated fans, as well as some club legends and former players, many of whom were excited about the prospect of Keane's return.
Keane is believed to have had two interviews with the club and was even offered the position on Wednesday.
But the 50-year-old is said to have turned down the chance to seal a return to the dugout after more than ten years since his last managerial post.
The news will come as a blow to frustrated fans, as well as some club legends and former players, many of whom were excited about the prospect of Keane's return.
The news will come as a blow to frustrated fans, as well as some club legends and former players, many of whom were excited about the prospect of Keane's return.
The former midfielder took charge of Sunderland in his first role in management from 2006 to 2008, guiding the club to Premier League promotion in his maiden season as Championship winners.
He then took the Black Cats to a 15th-place finish in the top flight in the following campaign, and was a hugely popular figure with supporters.
However, a falling out with then-chairman Niall Quinn and new owner Ellis Short led to the Irishman resigning from his position in December 2008.
Keane hasn't held a managerial role since his two-year spell in charge of Ipswich between 2009 and 2011, having gone into assistant coaching jobs with Republic of Ireland, Aston Villa and Nottingham Forest, but has been best known in recent years for being a box office pundit.