If things had gone to plan for Benitez, Liverpool would have signed the versatile midfielder from Aston Villa at the end of the 2007/08 season and gone to win a long-awaited Premier League title a year later.
That deal fell through, however, and now England international Barry is a key figure at ambitious City, one of several clubs hoping to evict Liverpool from England's top four.
Failing to sign Barry was a huge blow for Benitez, although Liverpool's superb title challenge last season which ended in narrow failure behind Manchester United, disguised the impact.
This season, however, five defeats in 12 league games have left Liverpool's title aspirations in ruins and with Xavi Alonso sold in the off season, the Anfield club looks short on the kind of proven midfield quality Barry would offer.
"The thing about Barry is that he can play in three positions," Benitez said in The Times on Wednesday. "To sign Barry would have been a good addition for the team.
"Everything was perfect. Good player, good mentality and English. The priority was Barry, then (Robbie) Keane.
While Liverpool have struggled badly this season, Manchester City's impact on the Premier League has not quite been what their billionaire Abu Dhabi owners would have hoped for.
A stoppage time defeat by Manchester United is City's only league loss this season but Mark Hughes' side have drawn their last five matches and for all the millions spent on signing the likes of Barry, Emmanuel Adebayor and Carlos Tevez, they still look far from the finished article.
"I'm looking forward to getting a few months of solid work in with the lads here," Barry told City's website.
"This is a very important period of the season coming up where we need to make things happen."
"For me it's three points in the next game," Benitez said. "I have confidence that the squad is better than people think, the squad is better than people think."
Both sides have injury problems. Liverpool are expected to be without striker Fernando Torrres for the lunchtime kickoff at Anfield although Steven Gerrard and Glen Johnson, who both missed England's weekend friendly against Brazil in Doha, should be fit.
