Jerome Sinclair is set to sign for Watford on July 1 after his Liverpool contract expires, according to Sky sources.
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, scoring in the FA Cup game against Exeter in January.
He is one of a number of Liverpool youngsters out of contract this summer including Alex O'Hanlon, whom Sky sources recently revealed was of interest to a number of Championship clubs.
They have also lost promising academy graduate Jordan Rossiter to Rangers, while Sky sources also understand there is interest in Sergi Canos, who spent the season on a successful loan at Brentford.