The 'Hero' singer was one of many stars rumoured to be in talks for American Idol's judging panel following the departures of Steven Tyler and Jennifer Lopez.
Negotiations apparently faltered because Iglesias was wary of the publicity that comes with appearing on the Fox series, reports Page Six.
"He's a private guy and doesn't want to expose his life to the show," an informant told the newspaper.
Mariah Carey is the only judge confirmed for American Idol's new season. She is expected to earn $17 million (£11 million).
Nicki Minaj is said to be in final negotiations for the series, even amid rumours that Carey does not want Minaj on Idol.
Alanis Morissette, Kanye West and Nick Jonas have also been linked to the series.
Veteran judge Randy Jackson will apparently take a new role on American Idol as a mentor for the contestants next year.
American Idol returns to Fox in 2013.