McCaw led the All Blacks to a first World Cup crown in 24 years this autumn and became the first New Zealander to win 100 Test caps but the star openside feels the honour would not be appropriate while he is still playing professionally.
"In the end the conclusion that he drew was that he would love to take it but now wasn't the right time," New Zealand Prime Minister John Key told RadioSport.
"He made the call that he's still in his playing career and it didn't feel quite right for him. That day where he's no longer on the pitch may be the right time for him.
"I have no doubt if we're the government or whoever is the government at that point will go back and talk to him, but it won't be happening on January 1, 2012."
Clive Woodward became a Sir after leading England to World Cup glory in 2003 and Ian McGeechan received a knighthood the year after taking the last lot of Lions to South Africa but McCaw would have been the first current player to accept the honour.