Forlan, who recently won the Copa America with Uruguay, is already 32 years old but continues to put in strong performances for club and country.
Awarded the Golden Ball at the 2010 FIFA World Cup and leading Uruguay to South American glory this year, it appears that Forlan could be on his way out of the Vicente Calderon.
The past season wasn't his best as Forlan totalled just 10 goals in 42 appearances, but his creativity and leadership on the field are undeniable, and he has been generally prolific throughout his career, claiming the European Golden Boot twice.
The signing wouldn't exactly comply with Fenway Sports Group's "Go Young" transfer policy, however the arrival of Forlan would do well to bring out the best in last season's acquisition Luis Suarez.
Suarez and Forlan are international strike partners and showed a brilliant understanding with one another as they led Uruguay to the Copa America.
Suarez was definitely the star of the show, netting four goals and receiving the tournament's MVP Award, but it was Forlan's creativity and passing that helped the 24-year-old perform so well.
With the next season approaching quickly, many Liverpool fans are expecting a breakout season from Suarez, and perhaps the best way to ensure he is able to shine is to bring in Forlan, a player who he is very comfortable operating with.
The only cause for concern is that as brilliant as Forlan has been in La Liga, when he played for Manchester United, he failed to impress.
Arriving from Independiente in 2001, Forlan's career never really took off at Old Trafford, where he only scored 10 league goals in 63 outings. He immediately shone upon arriving in La Liga though, so whether or not he is suited for England's top flight is questionable.
The Atletico Madrid man would likely demand a fee of £10million at the very least, not to mention what would likely be high wage demands. A loan move is a possibility, however.
In other Liverpool transfer news, the Premier League giants could be looking at yet another Uruguayan! Alvaro Pereira, a teammate to Luis Suarez and Diego Forlan, is attracting attention around the Premier League after his fine Copa America displays.
The Porto left-back is now a target for the Reds, but he could demand a somewhat hefty fee.
Arsenal and Chelsea will be rivaling Liverpool for Pereira's signature, so the Anfield outfit must act fast if they want to ensure the signing of the player who could fill the club's one true problem spot.