The former Girls Aloud star, 34, was linked to the Channel 5 reality show earlier this year but wasn't among the housemates who entered the Borehamwood compound in July.
Speaking on ITV's Lorraine, Sarah said: "I was offered it but they offer it to everyone every year so I think they hammed it up a little bit!"
She added: "I wanted to do something like what I'm doing now [being in a musical], music is my passion, but I wanted to try something a bit different."
Sarah's in rehearsals for Ghost: The Musical, taking on the role made famous by Demi Moore in the romance movie. Ex-Hollyoaks star Andy Moss plays the late Patrick Swayze's part.
"I'm nervous but I'm excited," she added, "because I always said I didn't know if I had the stamina to tread the boards but always thought about maybe doing not a lead role, then I got offered the job as the lead role and because I know the film and story and I'm passionate about it, I thought why, well not!"
Sarah revealed she will be doing an American accent in the musical and there are about seven songs – including 'Unchained Melody'. She has two solos.
Watch Sarah spill all the goss on her new role below: