The English shot-stopper has found his form once again while on-loan with the Scottish champions this season and was set to sign on a further one-year deal with an option to buy.
However, according to reports following discussions with Ralph Hassenhutl and the Saints hierarchy Forster has opted to remain at St.Mary's.
The Saints boss is believed to want Forster to compete with Alex McCarthy for the number one spot having been inspired by Forster's return to form.
Celtic boss Neil Lennon had made it clear securing Forster's services on a further loan deal or permanent was his top priority.
Angus Gunn heading the other way?
Currently, the Scottish Premiership winners only have one goalkeeper in Scott Bain at their disposal and that's where Saints might step in to help.
According to the Dail Mail the South Coast side would be willing to let Angus Gunn head to Celtic Park - where Mohamed Elyounoussi has extended his loan from Southampton.
Gunn would be moving North of the border on a loan deal with Joe Hart and David Marshall the other two candidates Celtic rumored to be interested in.
Celtic thought they had a done deal
The Scottish Sun is reporting Celtic had all but agreed on a deal with Southampton to sign Forster on loan once more with an option to buy, but Forster pulled out having spoken to his parent club.
The report says England international feels he wants to fight for a place down South.
Forster was the third choice keeper when he was sent out on-loan on Celtic but after impressing in his second spell at the club has caught the eye of Ralph Hassenhuttl.
The goalkeeper featured 39 times for Celtic in all competitions and last played for Saints in April 2019.