Roberto Firmino will not face any disciplinary action after the Football Association announced it had not found sufficient evidence that he racially abused Everton's Mason Holgate during last month's FA Cup third round tie.
The pair were involved in a flash point on the touchline during the clash at Anfield, with Firmino reacting angrily after Holgate pushed him over the advertising hoardings.
The pair had to be separated and the Everton man was then incensed at something said to him by Firmino.
An FA statement said: "Having considered all of the available evidence, we consider it is not sufficient to raise a charge against Firmino.
"However, we are completely satisfied that the allegation was made in absolute good faith by Holgate and that there is no suggestion of this being an intentionally false or malicious allegation."
Firmino issued a statement on the Liverpool website welcoming the decision.
He said: "As difficult as it has been to remain publicly silent, given the serious and damaging nature of what it was claimed I said during the game, I did so to demonstrate my respect for the process and to allow the issue to be investigated in the most thorough way.
"It is critical for football that tackling racism and all forms of discrimination is taken extremely seriously. As someone who has experienced racist abuse during my life, I know how damaging and hurtful it can be.
"Now the process is concluded, I would like to place on record, for the avoidance of any doubt, I did not say the word, or a variation of the word, that was claimed and subsequently reported in the media. I did not use any language that referenced race. I did not - and would never - reference a person's skin colour or culture, by means of insult, during a dispute or an argument.
"There is no place for discrimination on a football pitch, or anywhere else in life for that matter. I am pleased after exhaustive reviews of all the evidence, in this specific incident, the matter is resolved."
After the incident Holgate immediately told referee Bobby Madley what he thought he had heard along with several team-mates and the incident was formally reported at the end of the match.
In the course of its investigation, which lasted more than six weeks, the FA took statements from 12 players and officials from both teams along with the match officials, none of whom heard the words alleged to have been used by Firmino.
As part of the investigation, the FA had the footage assessed by two independent Portuguese-speaking lip reading experts as well as a Brazilian-Portuguese linguistic specialist.
"The evidence obtained from the experts did not support the allegation," said the statement.
Everton have accepted the decision, saying in a statement: "The club welcomes the FA's expression of complete satisfaction that the allegation made by our player, Mason Holgate, was done so in absolute good faith, that proper process was followed and that there is no suggestion of malice or dishonesty on Mason's part.
"The club also welcomes the FA's commitment to continue to treat all allegations of a discriminatory nature with extreme seriousness. In challenging circumstances, the FA has reached its determination and, as a club, we accept this. We will continue to offer the full support of the club to Mason and will make no further comment."