The cyclist was linked to the role alongside Jessica Ennis, Bradley Wiggins and Mo Farah, as producers try to capture the spirit of London 2012.
Simon Cowell reportedly wanted the Team GB stars to coach contestants on performing under pressure and perfecting their craft for a special Olympic-themed live show later in the year.
"X Factor producers were literally jumping up and down with delight when they heard that all four Olympic athletes had agreed to do the show," a source said.
"In Mo, Bradley, Chris and Jess he has bagged arguably the cream of the crop from Team GB, and he is ecstatic they are going to be involved."
However, Hoy tweeted: "Some amusing stories in press about me being a mentor on X-Factor; that's the first I've heard about it! #dontbelievethehype!"
He added: "And no I'm not doing Strictly either!!"
ITV was said to have spent around £1m to secure the athletes' appearance on The X Factor.
Photo gallery - Team GB's gold medal winners:
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