The Ivory Coast international has emerged as the primary target to succeed Mohamed Salah, who leaves Anfield this summer as a free agent, reports the Athletic.
Diomande finished the season at RB Leipzig with 13 goals and nine assists in 36 appearances, helping the club qualify for the Champions League and establishing himself as one of the most coveted young attackers in European football.
Paris Saint-Germain had also been firmly in the frame, but their pursuit is complicated by the need to sell before they can buy. Liverpool, by contrast, are in a stronger financial position to open talks with Leipzig directly.
Leipzig have made clear they would prefer to keep Diomande for at least one more season, and the club has already begun contract negotiations with his representatives. Sky Germany's Philipp Hinze reported that the proposed new deal would include a significant pay rise but no release clause — a deliberate move to retain control over any future sale.
The player himself has not pushed for a move. Asked last week by Kicker whether he would stay at Leipzig next season, Diomande replied simply: "Yes."
He added: "I'm at Leipzig and I enjoy playing here. In the end, it's always the statistics that count. It's been a fantastic year for me."
His public stance has not dampened Liverpool's interest. Paul Joyce of The Times, one of the most reliable voices on Anfield's transfer business, has reported concrete talks between the club and Diomande's camp.
It was also Diomande himself who set the emotional stakes last November, when asked for his dream club.
"I want to play at Anfield," he said. "My father's dream is to see me play for Liverpool. To fulfil my father's dream is a dream for me too."
Diomande is comfortable on both flanks and is a genuine two-footed player — a versatility that makes him particularly attractive as a Salah replacement. He joined Leipzig from Leganes for around £18 million last summer on a contract running until 2030.
Should Liverpool act, they will face a valuation they cannot talk down. Leipzig know exactly what they have.