The Reds had been monitoring the Egyptian international for a few months, until Chelsea came into the picture with a bid on Wednesday night.
Speculation suggests Liverpool valued the winger at £8 million, and were unwilling to pay over the odds for the 21-year-old.
Even on Saturday, Liverpool boss Brendan Rodgers hinted that the Reds were still in the race to sign Salah, but were also looking at other targets.
Chelsea boss Jose Mouriho spoke about the signing of Salah at Stamford Bridge, who comes in as a direct replacement for Juan Mata who has joined Manchester United for £37.1 million.
“We like the fact that he can play the same way our attacking players do, which is players with adaptability, to play right, left, or behind the striker,” Mourinho is quoted by Sky Sports as saying.
“He’s young, he’s fast, he’s creative, he’s enthusiastic. When we analysed him he looks the kind of humble personality on the pitch, ready to work for the team and to work and to adapt himself to a new life.
“We think with him and (Andre) Schurrle, (Eden) Hazard, Oscar and Willian we will be fine.
“We lose an experienced top player like Juan, but we bring in a young player with great potential.
“Hopefully he comes and hopefully with the talented players we have around in the same positions we all can develop together.”
The transfer window is open until Friday, 31st January.
How do you feel about Liverpool missing out on Salah? Were the Reds right not to pay more than what they valued him at? Let us know your thoughts in the comments below, or on Twitter @thisisanfield.