The Senegal international, 28, has a deal with Palace until 2029 but has attracted renewed attention after becoming an important player at Selhurst Park. Liverpool made an approach for Sarr in August while exploring alternatives after their pursuit of Yankuba Minteh stalled.
Crystal Palace made clear at the time that they did not want to sell the player, and chairman Steve Parish later confirmed that Liverpool's offer was considered too low to make a deal possible.
The approach has not stopped Palace from looking to strengthen their position. Sky Sports reports that talks with Sarr's representatives have been positive, although an agreement is not yet close.
Sarr joined Palace from Marseille in 2024 and enjoyed an impressive campaign last season, scoring 21 goals in 45 appearances across all competitions. He has since established himself as a key part of the squad.
Liverpool's interest emerged late in the summer, with the Premier League club turning to Sarr after difficulties in their pursuit of other attacking targets. Palace were unwilling to sanction his departure, leaving the winger in south London.
Parish explained the situation in September, saying Liverpool had contacted the club but that the size of their proposal suggested they did not expect a deal to be completed on those terms.
Sarr has continued to produce for Palace since the failed move. He has scored 33 goals and supplied 10 assists in 94 competitive appearances for the club, while his Senegal record stands at 23 goals in 87 international matches.
The current negotiations therefore give Palace the opportunity to reward Sarr's contribution while also providing greater protection against future interest. His existing contract still has almost three years to run, but the club are now looking to improve his terms.
There is no indication that an agreement is imminent, meaning the talks are still at an early stage. However, Palace's decision to negotiate a new deal underlines how highly they value the winger after resisting Liverpool's attempt to take him away during the summer.