"Although we are surprised and disappointed, we will resume our head coaching search immediately and find the right fit to lead our team and organization on and off the field."
The Colts announced the Patriots' offensive coordinator as their coach earlier Tuesday and said a press conference was scheduled for Wednesday.
Mike Garafolo of NFL Network reported some assistants, including defensive coordinator Matt Eberflus, had already agreed to a contract.
Schefter and Mike Reiss of ESPN.com reported the Patriots sweetened McDaniels' contract and that his family also played a factor in him staying in New England.
The 41-year-old Ohio native has previously cited his family as a reason for remaining with the Patriots, and the team also reportedly clarified that Belichick would return for the 2018 season, per Reiss.
Mike Florio of Pro Football Talk reported Sunday the offensive coordinator was having second thoughts about accepting the position, though the deal had seemed like a formality for nearly a month.
The Patriots lost defensive coordinator Matt Patricia to the Detroit Lions on Monday, so retaining McDaniels was a huge win.
- Josh McDaniels Will Stay With Patriots After Spurning ColtsNew York Times
- Josh McDaniels Walks Out on IndianapolisSports Illustrated
- Standing Pat: Josh McDaniels reportedly rebuffs ColtsAOL
- Meet Josh McDaniels, who will apparently not be the head coach of the Colts ...SB Nation
- Hours after accepting position, Patriots OC Josh McDaniels backs out of Colts ...Duluth News Tribune
- Colts have no legal recourse against Josh McDanielsNBCSports.com
- Switcheroo in Indy: Josh McDaniels pulls out of Colts' jobNewsday
- Patriots' Josh McDaniels bails on Colts' job | What it means for JetsNJ.com
- Josh McDaniels withdraws from Colts coaching jobNFL.com