I realize that there are always various stories about why things happen in Hollywood, but I've read that Paramount didn't want Wilder on this, rather than Wilder turning it down.
But I'm sure everybody -- including Wilder -- realized he couldn't make the film because his specialty was writing (with IAL Diamond) his own films, and The Odd Couple was from the newly minted "Broadway genius" Neil Simon.
Put another way, Simon was the "auteur" of The Odd Couple from when it was a hit play; there was no room for Wilder to make any changes.
Now, Wilder DID make a (failed) Lemmon-Matthau film from a known play(1974's The Front Page) but his script additions to that one were old-fashioned Borscht belt stuff and The Front Page helped secure Wilder's phase-out from Hollywood.
Also, though Billy Wilder seemed "the natural fit" for The Odd Couple (he had paired with Jack Lemmon many times, and with Matthau and Lemmon on The Fortune Cookie), in 1968, he was already viewed by tough Hollywood insiders as "losing it." Some Like It Hot in 1959 and The Apartment in 1960 had been a one-two punch of classic, hits, but each film after them showed off a writer-director(particularly on the WRIITING side), who was getting "old hat and out of date." Paramount didn't WANT Wilder on The Odd Couple.
Note in passing: none of Billy Wilder's movies after The Apartment were classics, but one was his biggest hit of all: Irma La Douce, reuniting "Apartment" stars Lemmon and Shirley MacLaine in movie that wasn't very funny but that was PLENTY sexual for early 60's America: it was about a romance between a French hooker and a French policeman and adult audiences craving Playboy-based sexual content flocked to it, even though it wasn't very good and showed nothing sexual at all.
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