The Sun says Kop boss Brendan Rodgers is willing to pay the England star £100,000-a-week AND play him in the central striking role he prefers.
Liverpool reckon they could land Walcott for just £8million as the unsettled 23-year-old is out of contract next summer.
But Rodgers needs Walcott to resist growing Arsenal pressure to sign a new deal before Christmas.
An Anfield source said: “Theo Walcott and Liverpool would be a perfect fit.
“It’s no secret we are looking for a striker to play with Luis Suarez and Fabio Borini.
“Theo ticks all the right boxes. He is young, he is fast and he has great skills.”