The Daily Mail says the Italians had a £3million bid rejected last month when new Anfield boss Roy Hodgson insisted that Lucas was part of his plans.
The Reds are poised to lose Javier Mascherano and Hodgson would be reluctant to lose another midfielder.
However, Palermo sporting director Walter Sabatini insists the door has not been closed on a deal and hopes to tempt Liverpool with an improved £5m bid.
"There is a dialogue with Liverpool,' said Sabatini. 'I believe there is room to negotiate."
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