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The 48-year-old was believed to be close to taking over as Scotland boss following talks last week with the Scottish Football Association.
The former Dundee United and Hibernian midfielder has two years left to run on his current deal with the Irish Football Association but has already been offered an extended contract until 2020.
He said he had “given the matter a great deal of thought and consideration”, according to a BBC report.
“It’s a huge honour to be offered the position,” he added. “However, I do not feel that this is the right opportunity for me at this moment in my career.”
Scottish FA chief executive Stewart Regan said the process of finding Strachan’s successor was ongoing.
“Michael and his advisers met our delegation in Edinburgh on Thursday and discussed all aspects of the role during a three-hour meeting,” he said.
“While this was a positive and cordial discussion, we respect Michael’s decision to remain loyal to Northern Ireland, with whom he has enjoyed great success.”
O’Neill took Northern Ireland to the round of 16 at Euro 2016 — their first major tournament in 30 years — but they missed out on qualification for this year’s World Cup in Russia after a play-off defeat by Switzerland.
Strachan left his post in October after Scotland failed to qualify for Russia 2018.
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