Black Cats manager Paolo Di Canio is said to have had the final say, and decided he wanted to keep the former England Under-21 midfielder at the club.
The Italian is understood to have taken the former captain to one side this week and asked him to buy into his plans for the club.
Sunderland have endured a difficult start to the season, and Di Canio believes Cattermole could be a major help to the cause if he returns to his best form.
Cattermole featured heavily under former managers Steve Bruce and Martin O’Neill, but doubts have been cast over his future on Wearside after the huge influx of players bought in by Di Canio.
However now the Italian has rejected the approach from Billy Davies’ side, it appears Cattermole is set to be given another chance to prove himself at the Stadium of Light.
The midfielder only managed to make ten Premier League appearances last season after suffering an injury hit campaign.
The news will come as a blow to Nottingham Forest who are still looking to take advantage of the Football League loan window and strengthen their midfield.