Larsson is idolised at the Scottish Premiership champions after scoring 242 goals in 313 appearances, but the Swede has insisted that he won't be replacing Neil Lennon, who resigned from his position on Thursday.
The 42-year-old told the Daily Record: "The speculation is not correct. I'll not take over as manager of Celtic.
"I'm flattered to be mentioned and regarded highly. It's natural since I'm now a coach and given my history at Celtic. It's a job with which I'll always be linked.
"I'm at Falkenberg and enjoying it. This is where my focus is. I will not break my contract."