Herrera, 22, was one of the best players for Granada last season in his holding midfield position.
But with Valencia in a state of disarray and asking for more time, they failed to close a deal for Herrera.
Valencia have been trying to get a Spanish passport for Gabriel Paulista to free up a foreign spot for Herrera.
Herrera decided not to wait any longer and is now heading back to the Estadio Nuevo Los Cármenes.
According to Ideal, Granada have found an agreement with Herrera and Man City for a second loan spell.
Herrera’s return is a boost for the Andalusian club, who finished an impressive seventh in La Liga after being promoted.
Granada were TOP after 10 games last season and their seventh place finish means they will play in Europe for the first time next season.
¡¡QUE NOS PELLIZQUEN QUE NO NOS LO CREEMOS!!
¡¡SÍ SÍ SÍ SÍ SÍ SÍ SÍ SÍ SÍ SÍ SÍ SÍ SÍ!!
𝗘𝗟 𝗚𝗥𝗔𝗡𝗔𝗗𝗔 𝗖𝗙 𝗝𝗨𝗚𝗔𝗥Á 𝗘𝗡 𝗘𝗨𝗥𝗢𝗣𝗔 𝗣𝗢𝗥 𝗣𝗥𝗜𝗠𝗘𝗥𝗔 𝗩𝗘𝗭 𝗘𝗡 𝗦𝗨 𝗛𝗜𝗦𝗧𝗢𝗥𝗜𝗔𝗔𝗔𝗔𝗔𝗔𝗔𝗔
— Granada CF ❤️⚪️ (@GranadaCdeF) July 19, 2020