Talks were ongoing between the Dons and Gerrard to replace Karl Robinson after the ex-England captain announced he would leave MLS side LA Galaxy in December when his contract expires.
The League One side, who were also speaking to other candidates, will continue their search, while Gerrard’s future remains unclear.
The 36-year-old has been linked with a playing role at Italian giants Inter Milan, as well as taking up a coaching role at either Liverpool or Celtic, where former manager Brendan Rodgers is in charge.
He could also be in line for a role in Gareth Southgate’s new coaching set up with England, should he receive the job on a permanent basis, a role he could combine with any potential job at Liverpool.
Reds manager Jurgen Klopp has always insisted Gerrard would be welcome back at Anfield whenever he wanted to return and it is understood informal talks are ready to get underway between the two parties.
However, more formal talks are likely to have to wait until the New Year, with Liverpool involved in a tight title race over the busy Christmas schedule.
Any prospective role with his former club is probably going to be within the academy set-up, however Gerrard is in no rush to make a decision over his next step.