The glamour model was rumoured to be entering the house alongside friend and X Factor contestant Rylan Clark, but producers have since decided that the pair are too similar, The Mirror reports.
"Katie has always been at the top of the list of potential CBB housemates and she was a real candidate this series because her deal with Sky is up," a source said.
"Her exes Alex Reid and Dane Bowers were in one series together, and it made a great talking point - Alex even won the show. But, of course, she was going to be an expensive booking.
"The idea of having Katie and Rylan seemed perfect. They promised late night karaoke sessions and lots of boozy antics.
"But the bosses had a re-think. They felt that their personalities were so similar, they might risk becoming a turn-off for viewers.
[Photo gallery - Rumoured Celebrity Big Brother housemates:]
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"They decided that only one of them could make the final line-up - so they chose Rylan off the back of his popularity on X Factor. Katie has been invited to take part in the summer edition."
Clark became friends with Price when he finished runner-up on her Signed By Katie Price series, which searched for her new protégé.
The Hills stars Heidi Montag and Spencer Pratt, Steps singer Claire Richards, comedian Jim Davidson and soap stars Ryan Moloney and Gillian Taylforth have been linked to the show, which starts on Channel 5 on January 3.