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While Trump originally called the idea an "incredible offer," and continued to weigh it through Wednesday, White House Press Secretary Sarah Sanders said he has now decided against it.
"It is a proposal that was made in sincerity by President Putin, but President Trump disagrees with it," Sanders said.
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Putin unveiled the idea proposal in a joint press conference with Trump on Monday following their summit meeting in Helsinki, Finland.
Asked whether he would extradite 12 Russian intelligence agents indicted in the United States last week for hacking Democratic Party computers, he said he could meet the US government 'halfway.'
"We can actually permit official representatives of the United States... into the country and they will be present at this questioning" of the 12 inside Russia.
"Then we would expect that the Americans would reciprocate and they would question officials, including the officers of law enforcement and intelligence services of the United States ... who have something to do with illegal actions on the territory of Russia, and we have to request the presence of our law enforcement."
For Russia, the focus of the quid-pro-quo was questioning former US envoy to Russia Michael McFaul and 11 others in Moscow's case against billionaire investor and human rights activist William Browder, the driving force behind Magnitsky Act sanctions on Russian officials passed by the US Congress.
"I think that's an incredible offer," Trump responded in Helsinki.
McFaul expressed outrage on Wednesday when Sanders said Trump was "going to meet with his team" to consider Putin's proposal.
But on Thursday Sanders made clear a deal with Putin was not in the cards.
"Hopefully President Putin will have the 12 identified Russians come to the United States to prove their innocence or guilt," said Sanders.
The indictments issued last week by special counsel Robert Mueller allege that the Russian hackers publicly released tens of thousands of stolen Democratic emails and documents using "fictitious online personas."
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Mueller is investigating possible collusion between Trump's campaign and Russia.
Sanders made the statement just as the US Senate took up a resolution objecting to any move by the Trump administration to make US officials available for questioning by Russian government officials.
In a sharp rebuke to the White House, the resolution passed with unanimous support from both parties, 98-0.
"Let this resolution be a warning to the administration that Congress will not allow this to happen," said Senate Minority Leader Chuck Schumer.
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