Jerome Sinclair is set to sign for Watford on July 1 after his Liverpool contract expires, according to Sky Sports.
The 19-year-old striker has struggled to break into the first-team under Jurgen Klopp and his predecessor Brendan Rodgers, and has made only one start for the Reds.
Liverpool would be due compensation due his home-grown status. Sinclair moved to Anfield as a 15-year-old from West Brom in 2011 and has made a total of five appearances.
He is one of a number of Liverpool youngsters out of contract this summer.