The American goalkeeper is out of contract at Aston Villa next month and is expected to reject a one year contract offer from his current club.
Spurs and West Brom have already been linked with Friedel but the Reds are now favourites to sign him, on a two year deal, with the 40 year old coming as back up to Pepe Reina.
Friedel made 31 first team appearances for Liverpool between December 1997 and November 2000.