The Filipino has instead opted to fight Timothy Bradley for a third time on April 9 in Las Vegas.
Khan had been in the running along with Terence Crawford but his best hopes of a lucrative pay-per-view clash lie in a clash with British rival Kell Brook next summer.
Brook’s promoter Eddie Hearn has booked Wembley stadium for a potential meeting on June 4.
Pacquiao’s promoter Bob Arum told the Manila Times: ‘It’s a done deal and it’s going to be a third fight against Timothy Bradley.
‘We took a lot of consideration knowing Bradley has improved a lot as a fighter since the last time they met in 2014.
‘Bradley is happy about it of course and that’s a really competitive fight for Manny.’
Pacquiao will have been out of the ring for almost a year when he faces Bradley having undergone shoulder surgery following his defeat by Floyd Mayweather last May.
His next fight was expected to be this last but Arum insisted he could carry on.
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