O'Neil was a leading contender for the role, just 11 months after he was sacked, and was in talks with Wolves bosses over a potential return.
Both parties were creeping closer to agreeing personal terms, but a deal to bring him back fell through last night when the 42-year-old decided against taking the role.
Gary O'Neil apologies to the Wolves fans after defeat at Brentford (Photo by Naomi Baker/Getty Images)
Gary O'Neil had been linked with a shock return to Wolves (Photo by Naomi Baker/Getty Images)
It is understood O’Neil decided to withdraw from the recruitment process after taking time to mull things over following advanced talks with the club.
An Express & Star poll found huge opposition among supporters to the idea of bringing the former boss back to Molineux – less than a year after he was sacked with Wolves second bottom of the Premier League table.
Nearly 90 per cent of voters said they would not want the former Bournemouth boss back in charge at Molineux.
The Wolves hierarchy are discussing other options internally, including Rob Edwards, Brendan Rodgers and Michael Carrick.
Middlesbrough boss Rob Edwards has been linked with the Wolves hotseat after a fine start to life at Middlesbrough. (Photo by George Wood/Getty Images)
Middlesbrough boss Rob Edwards has been linked with the Wolves hotseat after a fine start to life at Middlesbrough. (Photo by George Wood/Getty Images)
Wolves are also keen to speak to former Manchester United boss Erik ten Hag and they have discussed him internally.
The 55-year-old, who was sacked by United in October last year, took over at German side Bayer Leverkusen this season but lasted just three competitive games in charge.
Under-21s head coach James Collins and under-18s head coach Richard Walker took training yesterday as the club prepare for Saturday's trip to face Chelsea.
O'Neil left the club on December 15 last year, the day after Wolves lost 2-1 to Ipswich Town with a late goal at Molineux.
Vitor Pereira on the bench
Vitor Pereira was sacked by Wolves (Owen Humphreys/PA)
Wolves were struggling in 19th, having lost 11 of their 16 matches and picking up just nine points, before Pereira came in and helped them survive relegation.
But a winless run of 10 games this season, where Wolves have got just two points, saw the end of Pereira's time at the club despite being rewarded with a new three-year contract in September.
It is understood that former Wolves striker Robbie Keane would be interested in the job, but that it is unlikely to be explored further by the club at this stage. Keane is currently manager of Hungarian side Ferencvarosi and is well-liked among Wolves fans for his goalscoring ability in the late 1990s.