Liverpool have ended their pursuit of Virgil van Dijk and apologised to Southampton after the south coast club alleged they had made an illegal approach.
The Reds appeared to be in pole position to sign the Dutchman - believed to have been Jurgen Klopp's top target - after he apparently indicated his eagerness to become the latest player to swap St Mary's for Anfield.
But Saints cried foul, and it is underrstood they asked the Premier League on Tuesday to investigate an alleged illegal approach.
That led to high-level talks between the clubs on Wednesday, followed by an announcement that Liverpool had withdrawn their interest in the player.
A statement from Liverpool read: "Liverpool Football Club would like to put on record our regret over recent media speculation regarding Southampton Football Club and player transfers between the two clubs.
"We apologise to the owner, board of directors and fans of Southampton for any misunderstanding regarding Virgil van Dijk.
"We respect Southampton's position and can confirm we have ended any interest in the player."
Press Association Sport reports that Wednesday's discussions were the first time the clubs had spoken this summer as Liverpool had not been in contact about Van Dijk before then.
If both clubs agree the matter is over, then it is understood to be likely that the Premier League would not take any further action regarding the matter.
Liverpool had been expecting to pay in excess of £50m - a world-record fee for a defender - and were understood to be willing to make Van Dijk the highest-paid player at the club.
The 25-year-old, who has five years left on his deal at St Mary's, is said to have preferred Liverpool ahead of interest from Chelsea and Manchester City.
Last month Southampton chairman Ralph Krueger told Press Association Sport the club would no longer be bullied in the transfer market, saying they were in a position to turn down a £60million bid for Van Dijk.
"We do not need to sell any player for the first time since I've been here," Krueger said. "I can make that statement and - unless football decides it's in the best interests - we don't need to do that."