Newcastle's director of football Joe Kinnear wanted the former England striker as his assistant.
But Harford, who spent a short time at St James' Park as a player in the early 1980s and worked with Kinnear at Wimbledon, has declined the offer and instead agreed to become assistant manager at Millwall, whose coaching staff he joined last month.
The 54-year-old told Sky Sports News: "After meeting with Mike Ashley and Joe Kinnear, I made the hard decision that it is not the right time for me to take up this role.
"It was an honour to be asked to work at a fantastic club and I have the utmost respect for the Newcastle United and its fans.
"I've been in talks with Millwall over a period of time and just felt it better suited me at the moment. I didn't feel that at Newcastle."
Millwall manager Steve Lomas told the club's official website: "I know there was speculation about Mick going to Newcastle because of his past connections with Joe Kinnear, but he's fully committed to Millwall and to doing a job for us here."