The 23-year-old was undergoing a medical ahead of a proposed move to the Premier League champions, only to put the brakes on a switch to Stamford Bridge.
“The two clubs agreed a fee of £35 million, I think personal terms were agreed,” Moshiri told Sky Sports News.
“After the medical, we heard from Paul Martin, Ross Barkley's agent, that he changed his mind. And he wanted to reconsider his position during the January window
"Technically he will be with us because he's under contract for another year. It's a big surprise but that’s football."
It is unclear whether Chelsea or Tottenham will return to make a move for Barkley in January when he will be able to talk to clubs about making a free transfer ahead of the summer.
Barkley is currently sidelined by a hamstring injury and reports have suggested that he could be out for at least another eight weeks.