The former England international was sacked as Walsall manager on Monday evening and had been linked with a move to the City Ground on a playing contract while he waited for the chance to return to management.
Forest boss Megson however told the club website today: "There's no truth in it.
"Paul has had a taste of management and if he decides he wants to go back into the game as a player, it will be difficult for him to do.
"But he's a good friend of mine and I wish him well."