Larsson is out of contract at the end of the season and will be free to talk to clubs outside of England about a possible Bosman transfer in January.
There has been speculation that the former Arsenal player was set to finally put pen to paper on a new deal after negotiations have been taking place for more than 12 months.
But that is news to Birmingham boss McLeish, who said: "The last contact (regarding Larsson's contract) was a couple of months ago. I know Julia Shelton (City's head of football administration) has been liaising with Seb's agent. So, I guess, if anything is going to happen, it will be in the next break (transfer window)."
McLeish would like to keep hold of Larsson particularly for his effectiveness at set pieces and dead ball situations.
Meanwhile, McLeish is hoping striker Garry O'Connor's second loan spell with Barnsley will increase his match sharpness.
O'Connor had a month at Oakwell earlier in the campaign after returning to fitness after operations on both of his hips.
McLeish said: "We just feel he is a bit rusty. He is not going to get regular first team football here at the moment.
"Garry is looking for regular football and he asked to go back out on loan and I said fine.
"To be fair to the big man, he came in for the Blackpool game and did well.
"I was hoping he would move forward but, after the Brentford game in the Carling Cup, he said he needed more time to get match fit."