The Serie A club are reportedly prepared to meet the 20-year-old's €50m release clause, according to Italian news outlet Tuttomercatoweb, but only if I Rossoneri can raise funds from selling former Liverpool winger Suso.
The youngster has only played 71 career games for Flamengo, scoring 12 goals since making his professional debut in 2016, but his growing potential has attracted the attention of Europe's elite clubs.
Paquetá has also caught the attention of Brazil manager Tite, who named the young midfielder amongst his stand-by players for his 2018 FIFA World Cup squad for the tournament in Russia. He has also been capped eight times at Brazil Under-20 level, scoring on his debut in a 2-1 friendly win against England in September 2016.
Despite spending over £160m on summer signings so far this transfer window, Jurgen Klopp's Liverpool are still on the lookout for an attacking midfielder, after missing out on Lyon star Nabil Fekir.
The Reds have signed former Stoke City winger Xherdan Shaqiri for a £13m fee, but are looking for a more central attacking talent, and Paquetá fits this bill perfectly.
Meanwhile Chelsea and Manchester City, who are normally so prolific in the transfer market, have been very quiet so far during this window, signing only two proper first-team signings between them.
Pep Guardiola's side are tempted to move for Paquetá after missing out on Napoli's Jorginho, who chose Stamford Bridge over a career at the Etihad Stadium. The Premier League transfer window shuts in just under two weeks time on 9th August.