The Spanish international joined Premier League outfit Arsenal from Malaga during the summer for a reported £12m.
However, Benitez has revealed that the 28-year-old could have arrived in England much sooner, if Liverpool had had the funds to tempt his then-club Villarreal into parting with him.
"The chairman there wanted to keep the team and didn't want to lose one of his best players," said Benitez. "It wasn't possible to sign him because it was a big risk with the amount of money we had to spend.
"At the time he was a winger and not playing between the lines or as a second striker. We knew he could be a great player, but he was too much at the time and we could not afford him."
Benitez's Chelsea will come up against Cazorla's Arsenal at Stamford Bridge tomorrow afternoon.