Contracted to hometown club Helsingborg at the time, joined United for a 12-game loan spell in the 2006/07 season during the Swedish off-season.
Larsson recalled the talks over an elongated deal and how it tested his loyalty to Helsingborg.
"I remember having a talk, some of the players were involved too," he told Sky Sports.
"I said I really appreciate it but I can't do it. I promised Helsingborg and they invested a lot of money for a small club from Sweden to bring me home. I felt obligated to do what I put pen to paper. I promised them I would come back home.
"Even though United is so much bigger I felt that I couldn't break my promise."
He revealed that Gary Neville was even involved in the talks but admitted he couldn't break his promise to the Swedish club.
"Afterwards I can appreciate that as well because it's a world-class player talking with me, probably one of the best ever managers in the game, having a chat about things with me," he added.
"But we understood each other quite quickly.
"The only regret I have in my playing career was that I didn't stay on for the rest of the season because I think if I did that I would have been offered a little bit more, maybe an extension on that.
"The problem with that was that I promised Helsingborg to come home and I wanted the kids to have somewhere they could call home."