Parton released the song in 1974, but the song gained further popularity after it was covered by Whitney Houston in 1992, for the romantic thriller The Bodyguard.
The country singer said in her recent Netflix documentary Here I Am that Presley had also wanted to record a version of the song, but she denied his request due to money.
She opened up about her regrets surrounding the decision in The Big Issue’s Letter To My Younger Self.
She wrote: “I’d been invited down to the studio to meet Elvis and be there when he sang my song. That was the most exciting thing that had ever happened to me. Who doesn’t love Elvis?
“But then Colonel (Tom Parker, Presley’s manager) called me the afternoon before the session and said, ‘You do know we have to have at least half the publishing on any song that Elvis records?’
“And I said, ‘No, I did not know that.’ He said, ‘Well, it’s just a rule.’ So I said ‘Well, it’s not my rule.’”
Parton revealed that she then “cried all night long, ‘cause I was so disappointed".
“It wasn’t Elvis, I loved Elvis. And I’m sure he was as disappointed as I was because he had it all worked up and ready to go,” he said. “I know he loved the song.”
The 74-year-old added: “Priscilla (Presley’s wife of six years) told me later that he sang that song to her when they were coming down the steps of the courthouse after they divorced. That really touched me and I thought, ‘Oh well, I can only imagine.’ But it wasn’t his fault.”
She went on to reveal that she has written a song called“I Dreamed About Elvis Last Night”. Parton said: “I had an Elvis soundalike sing it with me and we actually sing ‘I Will Always Love You’ in it.”
Earlier this month, the country music legend was credited with having “cured coronavirus” after it emerged that Moderna’s vaccine – reported to be 94.5 per cent effective against coronavirus – had been partially funded by the Dolly Parton Covid-19 Research Fund.