The Premier League team confirmed on Thursday that the 22-year-old attacking midfielder has returned to his homeland, moving to Rayo for an undisclosed fee.
Details of Pozuelo's deal with the Liga club, who finished 12th in the Spanish top flight last season, are yet to be revealed.
Pozuelo joined Swansea from Real Betis on a three-year contract in July last year.
But the Seville-born playmaker failed to impress in what proved to be his only season at the Liberty Stadium, scoring two goals in 36 appearances.
His final appearance for the club came back in February in a Europa League clash with Napoli, and Pozuelo has now become the latest Spaniard to leave Swansea as they rebuild under manager Garry Monk.
Pozuelo's departure follows that of Michu, who joined Napoli on loan earlier this month, and Alvaro Vazquez, whose loan from Getafe ended with Swansea opting not to activate their option to buy, while Pablo Hernandez is also set to leave the Liberty Stadium before the end of the transfer window.
Bizarre Jose Mourinho statement aims to pre-empt punishment after Fenerbahce boss clashes with Galatasaray counterpart
'Andy Robertson has a decision to make as a player, where you either roll your sleeves up and give someone great competition or you accept decisions and say that your time is done.' Alan Shearer on the conundrum facing Arne Slot's Liverpool
