The 27-year-old Spaniard was reportedly close to leaving Anfield 12 month's ago with Aston Villa skipper Gareth Barry expected to join the Merseysiders.
However, neither move materialised, with Alonso going on to have one of his best seasons in a Liverpool shirt, anchoring Rafael Benitez's outfit to within a whisker of pipping Manchester United to the Premier League title.
The former Real Sociedad midfielder - who has won 64 caps for Spain - did finally leave Liverpool this year, joining Karim Benzema, Kaka and Cristiano Ronaldo as part of Real's £200 million summer spending spree.
And Gerrard has confessed that seeing his midfield partner depart for pastures new was difficult to take.
"Devastated, yeah. Devastated. But there was nothing I could do about it," he said in the December issue of FourFourTwo magazine, out today.
"Xabi said a long time ago that he wanted another chapter in his career and finally he got it and his team-mates and the coaches couldn't stand in his way. We just have to say thanks and move forward without him."
Alonso's exit has coincided with the Reds' disastrous start to the 2009/10 campaign, with five league defeats already three more than they suffered in the whole of last season, while losses to Fiorentina and Lyon in the Champions League group phase have left their hopes of European glory in serious doubt.
The Spaniard's absence - combined with injuries to both Gerrard and striker Fernando Torres - has been highlighted as one of the key reasons behind the club's dismal early season form.
And Gerrard says it is only now - with Alonso gone - that some people are beginning to realise just how influential a player he was.
"It's always going to be different when you lose one of the best players in the world - and people are finally realising that's what he is, on the back of his form for Real Madrid and the difference in us from last year," he said.
"We've got other midfielders here doing a good job but it will take a while before Alonso's out of our system because he was such a top player.
"Defensively, because of his intelligence at picking up his positions, he was so good at protecting the central defenders.
"And going forward, he was one of the best passers of the ball I've ever seen; someone who could create something out of nothing.
"He was sometimes underrated when he was here because of Torres, but when you play with him and without him you realise how much he meant to you, both as a player and the team as a whole."
The full feature-length interview with Gerrard can be read in the December issue of FourFourTwo magazine, out now.
