The Kiwi-born coach insisted he had rejected a 'break clause' in his newly-signed contract extension.
Speaking ahead of Saturday's test against Canada in Dublin, the Kiwi-born coach insisted he had rejected a 'break clause' in his newly-signed contract extension that sees him stay in Ireland until the 2019 World Cup.
Lions head coach Warren Gatland had said earlier this week 'there was an opportunity' to include Schmidt in his coaching team, just days after watching Ireland defeat world champions New Zealand for the first time.
But Schmidt would prefer to spend next summer with his Ireland squad on their tour to the US and Japan so he can help bring on those young players who replace those in the Lions squad.
"I didn't decide to take up the option of a break clause," Schmidt said.
"The contract was there, it was just that there was a break clause that I didn't opt for.
"A big part of the motivation for me not being involved in the Lions was going to the USA and Japan and working with this next cadre of players.
"The best of our players will go on the Lions and the more the better.
"That would be fantastic and hopefully a few more will put their hands up for Warren Gatland on Saturday.
"But the ones that don't go, they will become a really interesting group for us.
"I want to make sure I get to know those guys, and getting away on tour is one of the best ways to do it."
Schmidt has left the door open for the involvement of Andy Farrell, Ireland's defence coach and a former Lions coach.
"I would be delighted if Andy went," he said. "Firstly, because he is a tremendous coach and he does a fantastic job.
"And it also means that Andy will keep a bit of an eye on our guys.
"It is certainly one collective but he will be able to give us a bit of feedback on how our guys are going there.
"So we will have both bases covered there. That would be quite nice but those will be decisions that are not mine to make."
Schmidt has named a whole new starting XV for Saturday's test with three players making their debut, and a further five uncapped players on the bench.
Leinster youngster Garry Ringrose starts at centre, with Munster no.8 Jack O'Donoghue also making his bow. Munster lock Billy Holland also wins a belated first cap at the age of 31.
"We are always looking," Schmidt said, of the new faces included.
"You maybe play a dozen tests a year so you don't get too many windows to actually allow people to put their hand up."
Former Ulster coach Mark Anscombe, now in charge of Canada, is fully aware of the step up his players need to make, with 13 players in the current Canadian squad picked from the country's domestic league.
"We need to establish some sort of depth in our playing squad. The competition is not here (in Canada) so, when they come in to camp, we need to get them up to speed at Test level," he said.
"The level of rugby they come from to the level they need to be at is so far removed. Coming from club rugby to Test rugby is such a steep step up."