"I believe that today leading the national team of Ukraine is a somewhat premature step for me," Shevchenko, the record marksman for his country with 48 goals in 111 appearances, said in a statement published on the Ukrainian Football Federation's website.
"I hope the leadership of the Football Federation will understand my decision," he added.
Shevchenko, 36, who played for AC Milan and Chelsea as well as Dynamo Kiev in a goal-studded career, retired after his country's exit from the Euro 2012 tournament which they co-hosted in June.
An attempt to enter politics flopped when the party he was enlisted onto as a candidate for parliament failed to muster enough votes in an October 28 election to earn any representation in parliament.
He was offered the national coaching job a week ago. The post became vacant when Oleg Blokhin, the previous coach, accepted an offer from Dynamo Kiev.
Ukraine sit in fifth place in their 2014 World Cup qualifying group, with two points from three games.