The Germany boss says the Bayern Munich midfielder was convinced to stay after discussions with incoming manager Carlo Ancelotti.
Germany manager Joachim Low has told reporters, as quoted by the Liverpool Echo, that Mario Gotze chose to reject a move to rejoin Jurgen Klopp at Liverpool after positive discussions with Carlo Ancelotti.
Gotze was tipped to reunite with his mentor and former Borussia Dortmund manager at Anfield in a blockbuster move this summer after a frustrating season at Bayern under Pep Guardiola in which he made just 14 Bundesliga appearances.
However, Liverpool have missed out on their primary transfer target after it was confirmed by the 23-year-old that he has decided to stay and fight for his place at the Allianz Arena.
Low, who has handed Gotze all of his 50 senior caps for Germany since his debut as an 18-year-old in 2010, revealed that the player told him it was talks with Guardiola's replacement Ancelotti which convinced him to reject the Reds.
The Germany boss told reporters, as quoted by the Echo: "He’s had a long talk with Ancelotti and I think a few falsities were said about that, but a coach can never give a guarantee and he told Mario that everybody starts from scratch from the start of the season under him.
"Mario has had offers, but I always felt he is in Munich with his heart and he wants to prove himself there. He told me he wants to stay in Munich and take his chance with the new coach and I think that’s a fine decision because it’s what his feeling tells him to do, so it’s the right decision for him."
Low's comments come after former Bayern and Germany captain Lothar Matthau insisted that Gotze had made the right decision in turning down the "easy solution" of rejoining Klopp.
Missing out on Gotze will be a big blow for Liverpool, as it would have been a marquee signing for Klopp to pin his colours to ahead of his first full season at Anfield.