According to FourFourTwo, the winger is a serious target for manager Jurgen Klopp.
The Reds are looking at refreshing their front line, considering the fact that key stars Mohamed Salah and Sadio Mane are approaching 30.
However, the source suggests any move for Diaz will not be easy, as the 24-year-old is wanted by many clubs.
Liverpool may look to sign him in January, given Salah and Mane are away for the African Cup of Nations.
However, a summer deal seems likeliest, given the likes of Manchester United, Bayern Munich, and other top clubs also want to sign Diaz.
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