The two clubs had been in discussions over loan deal for Italian international who has flopped since his ?20million move to Anfield in 2009.
The deal has fallen through as Aquilani wanted a permanent switch, not another loan deal after his season-long spell with Juventus last term, according to Sky Sports News.
Italian job: Aquilani wants a permanent move home
It had seemed only last week that Aquilani's Liverpool career could be resurrected after club owner John W Henry heaped praise on the 27-year-old midfielder.
Henry spelt Aquilani's name incorrectly in a hastily posted Tweet, following the friendly with a Malaysia XI, such was his enthusiasm.
He said: 'One missing link last year Acquilani.'
Overloaded: Liverpool now have a huge number of midfielders
But having wholly underwhelmed in the two years he had been a Liverpool, it was anticipated Aquilani would be sold to Fiorentina following his spell at Juve.
The news blow to Liverpool boss Kenny Dalglish's transfer plans as he was looking to trim his squad following the arrival of Jordan Henderson, Charlie Adam and Stewart Downing.
The move would also free up some funds by offloading the likes of Aquilani before the close of the transfer window. CLICK HERE TO SIGN UP FOR OUR FREE FANTASY FOOTBALL GAMEBring it on! Henderson not overawed by challenge of making the grade at LiverpoolCoyle demands Liverpool and Arsenal target Cahill stays focused on BoltonAll the latest Liverpool news, features and opinion