The Saudi Arabia striker, 25, had been on trial with Sven-Goran Eriksson's side but said in an official press conference on Saturday that he has decided to stay in his home country with Al Hilal.
"We had reached an agreement but there were some issues in the contract that were not resolved.
"However, the reason I rejected the offer was not due to financial reasons but because I feel Al Hilal need me too much this season."
Al Qahtani stressed he still has ambitions to play in Europe in the near future.
He added: "I'm still looking to play in Europe and the situation could be different at the start of next season.
"I still have some offers and I will discuss them with the administration and I'm sure that I can succeed in Europe."