The French youngster has had a productive season for Lyon with five goals and four assists in all competitions.
The 20-year-old was linked with a move to the Reds in the summer (h/t Liverpool Echo) and has a contract at the French giants till 2023.
Aouar is also being watched by Chelsea, according to the report, and the player would not come on the cheap too.
Liverpool have had their run-in with Lyon earlier with Nabil Fekir (h/t Liverpool Echo) close to joining the Reds. That deal eventually failed and Aouar can play in a number of positions that will suit the Reds.
The 20-year-old Frenchman mostly plays down the middle of the park but has appeared as a left midfielder/winger for the Ligue 1 club.
Aouar certainly is one of the most exciting players in the French league and he would be a wonderful addition to the Liverpool side.
The Frenchman scored seven goals in all competitions for Lyon last season, and he seems well on the way to break that record in this campaign.
The Reds certainly could do with another quality attacker on the side, and if Aouar can become our missing attacking midfielder, we might have one of the best sides in Europe.