They joined the race for his signature last week and are reportedly close to make Kovacic their first marquee signing of this summer transfer window.
While Roma were initially the front-runners for his signature, it seems as if the Reds have outbid the Italian side.
Although he is in contract with Real Madrid until 2021, Real Madrid are in a hurry to get the midfielder off their wage bill this summer.
With the likes of Luka Modric, Tony Kroos, and Casemiro all performing well, this decision by the Spanish giants could be easily comprehended.
At just 22 years of age, Kovacic is expected to add the much-needed steel in the Liverpool midfield.
Though it possesses the likes of Emre Can, Lucas Leiva and Joe Allen, the indifferent performances of the latter duo left Jurgen Klopp with few choices last season.
While Allen got back to his best at the latter stages of last season, it might not be enough to earn him a spot in the Liverpool XI next season.
Jurgen Klopp is looking to add youth to his squad and that is where Kovacic fits the bill for the German manager. Kovacic is currently on International duty with Croatia in Euro 2016, due to which any decision on his future is likely to take place next month.