The former Liverpool No 2 rejected the chance to again work with the Frenchman, who has taken over from Martin O'Neill at Villa Park.
Thompson, who is now a pundit on Sky Sport, admitted the long working hours and commute from Merseyside were his main reasons for snubbing Houllier.
Old pals: Phil Thompson (right) in his days with Gerard Houllier at Anfield
Writing in the Liverpool Echo, he revealed: 'Sometimes in life you get presented with an opportunity that is too good to be true but, ultimately, has to be turned down.
'Had circumstances been different, I would have been delighted to accept the chance to join Gerard Houllier and work with him and Patrice Bergues once again at Aston Villa.
'But I had to weigh up the pros and cons and while it was both flattering to be asked, not to mention hugely enticing, I really had no other choice but to turn the offer down.
Mersey man: Thompson is a Liverpool legend
'When you work with Gerard, you are signing up to 12 hour days; on top of that, you have to go to reserve games, scout players and also head off to check up on forthcoming opponents - in other words, you have to be totally committed.
'Now don't get me wrong, I would love to throw myself at such a challenge again but, at the same time, I do not want to uproot my wife and my two boys; I'm not someone who could live away from them through the week.
'What's more, the thought of doing a daily commute on the M6 does not appeal. We all know that stretch of road, at the best of times, can resemble a car park but to do the job properly, you really have to be living in the vicinity of the training ground.
'I would have been cheating Gerard, the club and the fans and that would not have been fair; Aston Villa are a terrific club with a great history and I remember only too well being on the end of a 5-1 drubbing there in 1976.
'It's fantastic to see Gerard back in the game and I have absolutely no doubt that he will do a terrific job. I've heard some people try to say that he is not the right man to take over from Martin O'Neill but the Aston Villa supporters I have heard are genuinely happy with the choice.
'He has got a wealth of knowledge, knows the game inside out and it will be fantastic occasion when Liverpool tackle Villa at Anfield in the first weekend of December.
'It would have been great to strike up the partnership we had at Anfield and to be involved in the day-to-day running of football club again really did turn my head.
'But there were other things to consider and my family comes first; to take on such a job, everything had to be right and that wasn't the case.
'So those people who watch me on Soccer Saturday, you have been warned - I'll be ranting and raving on television for a good while yet.'
Neil Moxley: Villa fans must back club even if they can't get behind HoullierGerard Houllier named Aston Villa manager after agreeing a three-year dealA Houll lot of trouble! The key issues facing new Aston Villa boss Gerard HoullierASTON VILLA FC