The Reds had been interested in bringing the Switzerland star to Anfield as they prepare for life without Barcelona-bound Luis Suarez but he will remain with Bayern Munich
As reported by Goal, the Merseysiders were willing to pay £15 million for the 22-year-old and held tentative talks with the German champions in June.
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"Xherdan is an important player for the future," the Bayern chief told Kicker. "There are no thoughts at all about selling him."
Shaqiri shone at the World Cup for a Swiss side who were knocked out in the last 16, scoring a superb hat-trick in their 3-0 win over Honduras.
The playmaker had been wanted as part of a new-look Anfield attack in the wake of Luis Suarez's move to Barcelona and had even intimated that he would be open to moving to the Premier League.
But with Bayern keen to retain a player who scored six goals in 17 Bundesliga appearances last season, Liverpool will be forced to look elsewhere.
The Reds are close to capturing Benfica winger Lazar Markovic in a £19.8m deal and the Serbian could be quickly followed by Belgian striker Divock Origi and Southampton defender Dejan Lovren.