The Germany U21 international had been heavily linked with a move to the Premier League for 2017-18, but he will be remaining in the Bundesliga
The 21-year-old midfielder had been heavily linked with a move to the Premier League for 2017-18.
However, Goal reported on Wednesday that Liverpool were no longer in the running.
That has cleared the path for the Germany U21 international to remain in the Bundesliga.
Dortmund have confirmed that Dahoud has signed a contract through to 2022.
The club’s sporting director Zorc has said of the deal on the club's official website: "Mo Dahoud is a highly talented and excited player for the central midfield we were scouting very intensive since years.