Two days of intense talks took place with Villa holding out for £18m cash, says The Sun.
A 5pm deadline was set by Villa but when Liverpool failed to meet it, Villa immediately released a statement saying that the England star was staying.
It read: "Aston Villa can announce that Gareth Barry will be staying with the club.
"A final deadline to conclude this episode was set that all parties agreed to. This deadline has passed so Gareth will remain with Villa."
The speed in which Villa closed the debate stunned Liverpool and Barry, 27, but the Kop remain determined to get the midfielder.
They had agreed to pay £18m but there was haggling over the methods of payment and Liverpool asked for a small deadline extension.
Villa chief Randy Lerner refused and, even though Liverpool had everything in place by 5.15pm, Villa would not negotiate further.