Stoke were keen to find a coach with Premier League experience after their dismissal of Mark Hughes, and were impressed with Sanchez Flores' performance during his one season with.
The former Benfica and Atletico Madrid boss said in quotes reported by the Spanish press: "I am and will be coach of Espanyol".
"I belong to Espanyol". I'm well, absolutely content with my situation, and I don't have to explain anything else. Football brings up these kind of situations where clubs ask. here at Espanyol it is hard to move someone. "We feel happy. We are in a happy place and we don't want to break that up".
On Wednesday, the Potters sent a delegation to Barcelona to meet Flores in the hope of securing a deal.
Flores had been expected to tell the La Liga club that he was bound for the Premier League strugglers.
It now seems like the Republic and Northern Ireland are set to be on the lookout for new managers.
Derby County boss Gary Rowett was originally the leading contender to succeed Hughes, but he signed a new three-and-a-half-year deal with the Championship club on Tuesday.
Stoke sacked Hughes last weekend following an FA Cup third round defeat to Coventry City, which left the club with just a relegation battle to contend with, and their league position remains precarious ahead of Monday night's game against Manchester United.