Real Madrid have decided midfielder Lassana Diarra will play in the Champions League knockout stages and not striker Klaas Jan Huntelaar, UEFA said on Monday following Sunday's deadline for registrations.
The Spanish champions were forced to choose between the two new signings because of UEFA rules that state only one player can be registered who has already played in a UEFA competition with another club this season.
They initially said they would fight the ruling in court but backed down last week.
A Real spokeswoman declined to comment on the decision.
Real, who face Liverpool in the Champions League last 16, had argued that the rule was discriminatory, pointing to players who can play in two European competitions when their clubs drop from the Champions League into the UEFA Cup.
But they scrapped their legal challenge following a meeting last week between the club's new president Vicente Boluda and UEFA chief Michel Platini.
Netherlands striker Huntelaar and France midfielder Diarra have already played in the UEFA Cup this season for Ajax Amsterdam and Portsmouth respectively.
Real host Liverpool at the Bernabeu on February 25 and visit Anfield on March 10.