Degen joins Stuttgart on loan deal
The Swiss international joined Liverpool in 2008 after leaving Borussia Dortmund two years ago but played only a handful of games.
"I'm looking forward to the challenge and the wonderful VfB fans," Degen told the English club's website.
"I really want to make use of my chance. It's fantastic to be working together with Christian Gross again. I had a very successful time with him in Basel."
VfB Stuttgart boss Gross said: "I know Philipp very well and rate him highly both as a football player and as a person.
"He is a very athletic and fast player, who often looks to push forward. Philipp wants to take his chance at VfB."