The relationship between Horan and Lovato has been the subject of speculation since June, though the duo have both denied a romance.
A video filmed backstage at The X Factor USA has now been released and shows Cowell teasing Lovato about the reports.
After Lovato tells Cowell that Horan said hello, he replies: "Keep away from him. He's pure."
Lovato insists that there is not a romance between herself and Horan, saying: "I'm not looking for anything. I'm not going to date anybody for a whole year. And I made that clear to him."
However, when Cowell asks if she has kissed Horan, Lovato becomes embarrassed and says that she hasn't.
"It's what people are thinking," Cowell jokes.
Horan and Lovato reportedly had a 'romantic dinner' together after the MTV Video Music Awards, although Horan also visited Justin Bieber's home after the ceremony.
The X Factor USA returns with its new season on September 12 on Fox.
Watch Simon Cowell and Demi Lovato backstage at The X Factor USA below: