The former fast bowler, now 47, was approached by the county to instill the disciplined aggression which is the hallmark of the Australian Test side after one of the most disappointing Championship seasons in their recent history.
The captain, Mike Watkinson, has steered his side to the Benson and Hedges Cup and NatWest Trophy double but their success at one-day level has not been mirrored in the Championship, where they have won only two games all season.
It has led to unrest among the passionate Old Trafford membership, and the committee acted by informing John Stanworth, who took over in a caretaker capacity following David Lloyd's appointment as England coach at the beginning of the summer, that he would not be given the position on a permanent basis.
However, approaches to Lillee, who took 355 wickets in a 70-Test career stretching 15 years, have failed after he was unable to extricate himself from his commitments with the ACB, which would have ruled him out of the beginning and the end of an English season.
"I was extremely interested in the Lancashire approach - I perceived it as a great challenge at this stage in my career," explained Lillee, who, with former Test team-mate Rodney Marsh, coaches Australia's emerging players in Adelaide. "Unfortunately, my contract with the ACB has not permitted me to continue with discussions."
The chairman, Bob Bennett, confirmed: "It is a pity that his arrangement with the Australian Cricket Board does not allow him the chance to consider the position but he is a man of integrity who will not try to serve two masters."
Worcestershire's Graeme Hick has rejected three lucrative offers to play first-class cricket abroad this winter after being left out of the England tour party for Zimbabwe and New Zealand. Hick is to spend the winter with his family after six years of almost continuous cricket.
Northern Districts and Auckland in New Zealand and Western Province in South Africa are believed the be the sides who wanted to sign Hick, who yesterday scored his 90th first-class century.
Hick said: "I will be spending the winter with my family, who I haven't seen much of in the past five or six years with cricket commitments, and basically recharge the batteries."
Sussex have offered England's discarded leg spinner, Ian Salisbury, a five-year contract, with the promise of a benefit, in an attempt to keep him at Hove.Reuse content