The 36-year-old was widely tipped to join the elite squad's permanent head coach Stuart Lancaster at the helm of the national side after a successful stint during the Six Nations.
Despite Lancaster being keen on keeping hold of the former prop, Farrell has announced his decision to remain in charge of Saracens.
"It has been a special privilege for me to be involved in the Saracens coaching staff for the past two-and-half seasons," Farrell told the club's official website.
"We have made decent progress during this period but, in truth, as a club, we have barely scratched the surface of our potential. The job isn't anywhere near half done, and I have decided I want to help finish the job."
Farrell currently coaches his son Owen, who can play at fly-half and centre for both Sarries and England.