The actor did not want to work on another South Indian police drama, having already signed up for the sequel to Dabangg.
"In Dabangg 2, which goes on the floors in March, Salman plays a cop yet again. That basically forced him to rethink Dookudu," a source told Mumbai Mirror.
Khan's most recent commercial successes - Dabangg, Wanted and Bodyguard - have seen the actor deliver either police or security roles.
Telugu star Mahesh Babu,who was expected to produce the remake, expressed surprise at Khan's decision to opt out.
"The entire Khan family had watched the Telugu version of the film and they were very keen on remaking it in Hindi... The actor's decision to back out after all this has come as a shock to Mahesh," added the source.
Khan's last film beat the record for the highest UK opening set by Tees Maar Khan.
The actor had previously made a cameo appearance as himself in a song sequence in the Farah Khan movie.