Reports emerged on the weekend claiming that the 35-year-old Munster lock had agreed to join the European champions.
However, Toulon have made it clear that no deal has been done between any parties.
"The Rugby Club Toulon, accustomed to all sorts of rumours about future potential recruits, deny what some see as information - namely the signing of the second-row Paul O'Connell," read an official statement.
"The Rugby Club Toulon cautions that Paul O'Connell has not signed a contract with Toulon Rugby Club, and the alleged contacts between the player and the 'Red and Black' are pure speculation."
O'Connell was recently named the player of the tournament at the Six Nations after guiding Ireland to glory following a nervy final round.