The 25-year-old made the move to Los Blancos from Penarol in 2016, initially turning out for the club's B side before progressing to first-team level in 2017.
Valverde has made 246 appearances for his current side in all competitions, contributing 19 goals and 23 assists in the process, and he has been a vital player for Carlo Ancelotti's side this term.
The Uruguay international has made 42 appearances in all competitions at club level in 2023-24, scoring one goal and registering eight assists in the process.
Valverde signed a new deal with Real Madrid last November, with his current terms in the Spanish capital due to expire in June 2029, but Liverpool are allegedly determined to bring him to Anfield.
Liverpool put club-record bid on the table
According to El Debate, Liverpool have offered €150m (£129m) for Valverde, with the Merseyside outfit viewing the South American as a 'dream signing'.
The report claims that current head coach Jurgen Klopp is a huge admirer of the midfielder, although the German will be standing down from his position this summer.
Real Madrid are not thought to be under any major pressure to make a large sale this summer despite the likely arrival of Kylian Mbappe in what will be a big-money deal.
Mbappe is set to make the move to Bernabeu on a free transfer when his contract at Paris Saint-Germain officially comes to an end, but the France international will receive a substantial signing-on fee and is also expected to become Real Madrid's best-paid player.
Liverpool still determined to boost their midfield
Liverpool brought in Alexis Mac Allister, Dominik Szoboszlai, Ryan Gravenberch and Wataru Endo to boost their midfield depart last summer following the exits of Jordan Henderson, James Milner, Naby Keita and Fabinho.
The Reds are still said to be determined to boost their midfield for next season, though, with the club looking to bring in a marquee player in the middle.
Back in September, Valverde suggested that he could potentially seek a move away from Real Madrid in the future.
"Premier League offers? I have the possibility of playing for Real. The day I don't feel like that, I will probably look for another solution or Real itself will look for one for me," Valverde told reporters at the time.
Manchester City and Chelsea are also believed to be admirers of Valverde, who has won two La Liga titles, the Copa del Rey and the Champions League during his time at Bernabeu.