The "Wrecking Ball" singer and The Hunger Games heartthrob were spotted kissing and hugging at the festival. The source added that they did not seem to be hiding their affection and appeared happy to be together.
The official Falls Festival Twitter account and festival goers also confirmed their reunion, taking to the social media site to share their excitement.
"Miley Cyrus dropped in last night," @fallsofficial shared.
The former couple reunited last November at an animal rescue organization in Los Angeles, when the 23-year-old singer -- an avid animal advocate -- helped Liam adopt a 6-month-old puppy who he nicknamed "Dora the Explorer."
One month earlier, Liam opened up about his relationship with Miley in an interview with Men's Fitness.
"I mean, look -- we were together five years, so I don't think those feelings will ever change," he explained. "And that's good because that proves to me that it was real. It wasn't just a fling."
"It really was an important part of my life and always will be," he continued. "She's a free spirit. I think she'll always surprise people with what she does, but she's not a malicious person in any way. She's a young girl who wants to do what she wants to do."