The `Hannah Montana` star and the Australian actor - who rekindled their romance in September following a brief separation - reportedly called time on their 18-month relationship a few weeks ago.
A source insists the couple are "not together" anymore following photos which emerged at the weekend of Liam, 20, getting close to model Yolanda Vendy.
The source added to gossip website HollywoodLife.com: "If Liam and Yolanda were hooking up - it wasn`t cheating."
Liam - who has spent the previous month in his native Australia, while Miley has been working in Los Angeles - was seen whispering with Yolanda at a private table in Sydney`s Eve nightclub on Friday (29.11.10), with onlookers claiming he definitely "looked single".
One club insider said: "He is definitely back on the market after splitting with Miley."
When asked if she was friends with the actor, Yolanda told Australia`s Daily Telegraph newspaper: "If that-s what you want to call it."
Liam has refused to be drawn on the break-up reports, only saying that Miley was working in the US while he spent time with friends at home.