By ESPNSTAR.com staff
Walcott is yet to pen a contract extension with the Gunners and so could leave as a free agent in the summer - and can talk to other clubs when the winter transfer window opens on January 1st, 2013.
The England international has grown disillusioned with life under Arsenal manager Arsene Wenger, who remains unconvinced the player can hold down a regular starting spot in his preferred position as a striker.
Meanwhile, Liverpool's squad look well short of attacking options should star striker Luis Suarez get injured or receive a suspension in the second half of the season.
As a result, UK tabloid The Sun believes the Gunners are ready to offer Liverpool Walcott plus £8million for their 17-year-old starlet Sterling.
Sterling is considered the most exciting young talent to emerge from Anfield during Brendan Rodgers' reign at the club. The Liverpool boss is understood by the report to be "not keen" on losing Sterling, who won his first cap for England in Sweden this week. However, it also stated that Rodgers "is an admirer of Walcott" and hinted a "shock swap deal" was on the cards.
Walcott is currently fighting to be fit for Saturday's north London derby against Tottenham after a buttock muscle injury ruled him out of the midweek England friendly defeat in Sweden.