Dr Gupta, CNN's chief medical correspondent and a practicing neurosurgeon, had been approached by the Obama transition team and discussed the job with President-elect Barack Obama late last year in Chicago, the New York Times reported.
An Obama Administration official said that Dr Gupta had been under 'serious consideration,' and added: "We know he will continue to serve and educate the public."
Several other candidates are now under serious consideration, including Dr Irwin Redlener, the director of the National Center for Disaster Preparedness at Columbia University, according to people who have been briefed on the situation.
Dr Gupta's wife, Rebecca Olson Gupta, is expecting a child, and he wants to spend more time with his family and continue practicing medicine and serving as a CNN correspondent.
Dr Gupta presides over a small media empire that includes appearances on the 'CBS Evening News' and columns in Time magazine.