AC Milan's official television channel this morning confirmed that the Anfield club are now holding talks over a permanent deal for the Italian international striker.
The news comes after negotiations over a loan move fell through late last night.
And while Liverpool are now clearly firmly in the driving seat to land the former Manchester City star, reports in Italy suggest that Arsenal and Chelsea could yet try and crash the party.
Indeed, it is thought that Balotelli's agent, Mino Raiola, deliberately chose to hold talks in London to allow the Gunners and Blues to get in on the action.