Sam Vincent, who played for the Magic as well as Jackson, presented a scenario that appealed to Magic CEO Alex Martins, the Orlando Sentinel reported Friday.
However, before Martins could discuss the proposal with Magic owner Rich DeVos, Jackson reportedly withdrew from consideration Thursday night.
"It drew some interest from Phil," Vincent said, according to the Orlando Sentinel. "But in the end, Phil decided to go with another opportunity."
Martins commented Thursday to the Sentinel in an email.
"Not because of this specific situation, but because I have been consistent during the search that I won't comment on specific candidates," Martins said in an e-mail. "I stand by my statement that we will put a premium on searching for Championship experience in the positions within in our search."
Jackson has won 11 NBA titles as a coach, six with the Chicago Bulls and five with the Los Angeles Lakers.
The Magic fired general manager Otis Smith and coach Stan Van Gundy two weeks ago. It was part of a tumultuous season that included a trade demand by center Dwight Howard and friction between the team's star and the front office.
Since Smith became general manager in 2006, the Magic had the greatest run of success in franchise history and reached the NBA Finals for the second time in their history. In 2010, Smith was given the additional title of president of basketball operations.
Van Gundy, 51, served as coach for five years and compiled a 259-135 regular-season record. His teams made the playoffs five times and won three division titles and one Eastern Conference championship.
The new GM will have the opportunity to hire the next coach, Martins said.