The Reds are now five points in arrears of league leaders Manchester United and will need a win to keep its title hopes alive.
The inclusion of Gerrard is a major boost but Reds manager Rafael Benitez remained tight-lipped on whether the England international would start or not.
"He is improving. In these situations each day is important," Benitez told the club's official website.
"He is working with the medical staff and is progressing.
"Normally he is a player who recovers quickly. He needs less time than other players.
"I was surprised because the Spanish press said he'd play some minutes this weekend and then play against Real Madrid, but the truth is we don't know yet.
"Maybe he could be on the bench against City but we don't know.
"He wants to play every single game. He knows the game against City will be very important, and also the Real Madrid one too."