Di Matteo was reportedly on the verge of moving to Villa, with Dr Tony Jiantong Xia’s takeover of the Midlands club in its final stages.
The Chinese businessman was believed to want to place Di Matteo in charge, but Sky say these reports are not entirely correct.
Instead, Di Matteo remains just one of a number of candidates still in with a chance of getting the Villa job.
The former Chelsea boss is set for talks with the Claret and Blues next week, but Villa are still weighing up their options.
Villa are believed to have Burnley boss Sean Dyche and Brendan Rodgers high up on their wishlist of potential new candidates to take over at Villa Park.
It has been suggested that Rodgers is set to take the Celtic job (Daily Mirror), but this latest news could throw that move into doubt.
David Moyes has also reportedly been considered by the club, but the Scottish manager would not be keen on a move to the Championship.
Nigel Pearson, who held talks with Villa last month, still remains a candidate too, but he is now considered an outsider to get the job.