The 19-year-old has caught the eye in the Europa League this season, but his contract expires at the end of the campaign.
Talks are ongoing over a new deal for the highly-rated teen, but rival clubs are starting to keep tabs on Balogun with the belief he could soon become available.
And, according to The Athletic, Liverpool are one of those clubs keen on signing Balogun should he decide to quit Arsenal.
The report states Arsenal and Balogun remain far apart over an agreement for a new deal, and he can begin talking with foreign clubs from January 1.
Liverpool, however, must hold off until the teenager actually becomes a free agent before they can open talks with him.
Balogun made his debut for Arsenal earlier this season, and he's since played five times for Mikel Arteta's side.
He's netted two Europa League goals - against Molde and Dundalk - and also grabbed an assist in a 4-2 defeat of the Irish side.
The youngster has also been prolific at youth level for Arsenal, and a move abroad - perhaps to Germany - is said to be of interest to the New York-born teen.
Arsenal's youth striker Folarin Balogun has been linked with Liverpool ahead of the January transfer window.