The pop babe and Fast and Furious actress - who is married to Liam's brother Chris - attended the Falls Music Festival in Byron Bay in Sydney on Thursday and the Spanish beauty posted a sweet photograph of her arm-in-arm with Miley and surrounded by friends.
She captioned the picture Instagram: "Me encanta la gente con la que me puedo volver loca./ I love people I can be crazy with!! (sic)"
A source revealed that the Wrecking Ball singer and Hunger Games star were seen "cuddling and kissing".
Another revealed to E! News that the former couple were "affectionate" in the VIP area and "Liam was seen rubbing Miley's back at one point."
The couple first met on the set of Nicholas Sparks' movie The Last Song in 2009 and after a serious three years together, the couple got engaged in 2012.
But in 2013 they split, though they continued to speak highly of one another, and Liam said recently: "We were together five years, so I don't think those feelings will ever change. 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."