The Iranian football officials negotiated with Estili on Tuesday as their first choice but the 44-year coach rejected the offer.
“I’ve lost my brother recently and I am feeling sad. I think it would be better if somebody else led the team,” Estili said.
It is said Zob Ahan coach Mansour Ebrahimzadeh and Foolad coach Majid Jalali are the other choices to take charge of the team.
Iran is scheduled to face Iraq on June 19 in the second round of the London 2012 Olympic Games qualifiers. The second leg will be held on June 23 in Tehran.
Iran Olympic team has been without a coach since the Guangzhou Asian Games where Gholam Peyrovani retired from his job.
Iran beat Kyrgyzstan in the first round of the Olymic qualification last month. Hooman Afazeli took charge of the team as the interim coach.
Iranian officials appointed Carlos Queiroz as Iran football coach last week and the 57-year old Portuguese will supervise the Olympic team.
The last time Iran football Olympic team took in the matches was the 1976 Summer Olympics held in Montreal, Canada. In that competition the team advanced to the next round but was defeated by the Soviet Union 2-1 in the knockout stage.