The ex-Genesis man has re-recorded the track with singer Ane Brun for his upcoming album New Blood, which is released on October 10.
Gabriel told The Quietus: "There's an interesting story about this song. Because there was this reference point of American roots music in it when I first wrote it, it was suggested that Dolly Parton sing on it.
"But Dolly turned it down... and I'm glad she did because what Kate did on it is... brilliant."
He added: "Obviously a lot of the power of the song came from the way that Kate sings it. Dolly later asked me to sing it with her on her TV show but I couldn't because I was on tour.
"Ane has moments when she really sounds like Dolly, so I thought it would be interesting. She also has a cooler Scandinavian aspect to her singing which I like a lot."
Bush last week confirmed details of her new studio album 50 Words For Snow, which is released on November 21.
In 2009, Take That revealed that Gabriel and Bush's version of 'Don't Give Up' was the song that most inspired them.
Listen to the original version of 'Don't Give Up' by Peter Gabriel and Kate Bush below: