The Real Madrid man spent last season on loan at the Barcelona club.
The Spanish winger, who spent last season on loan at Espanyol, was linked with a £7.2 million move to Anfield by Metro, who were quoting reports in Spain that Liverpool wanted him.
Now it is clear they will not be signing him. On the same day that Liverpool proudly announced the signing of James Milner they have officially seen Vazquez go elsewhere.
It has been declared by the RCD Espanyol official website that Vazquez has joined the club on a contract until 2019. No fee has been confirmed, but Real Madrid have the right to purchase him back in the next two summer windows.
RCD ESPANYOL OFICIAL (@RCDEspanyol) June 3, 2015
Vazquez, who has never played a senior game at Real Madrid, featured 39 times for the Barcelona club last season, scoring four goals.
Liverpool obviously have bigger targets in mind and the likelihood is Vazquez was never a genuine option. However, fans will not enjoy it if Vazquez goes on to star in La Liga next season.