Jurgen Klopp is a big admirer of Syria-born Dahoud and wants to bolster his squad after a dire January.
The 21-year-old could be available for around £10million after turning down a new deal.
Jurgen Klopp wants to sign Mahmoud Dahoud before the transfer window closes
His current contract runs out in 2018 and Monchengladbach are understood to be willing to listen to offers.
Liverpool have won just once in the last eight competitive fixtures – an FA Cup replay against Plymouth earlier in the month.
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And Klopp is keen to strengthen the depth of his squad after they suffered a humiliating defeat at the hands of Wolves in the FA Cup today.
But they Merseyside outfit will face competition from AC Milan and Juventus who are tracking the midfielder's situation.