The 22-year-old joined the Rosanero in 2009 from Penarol, and has gone on to score 16 goals in Serie A from 69 appearances.
The Turkish champions were looking to bolster their squad ahead of the Champions League group stage, and had earmarked Hernandez as a potential signing, only for Zamparini to reject their advances.
"A week ago, we rejected a €12 million offer from Galatasaray for Hernandez." the chairman was quoted as saying by the Giornale di Sicilia.
"I want to keep Abel. His manager Giuseppe Sannino and I am sure he will do great things."
Palermo open their Serie A campaign at home to Napoli on Sunday at 20:45CET.