Wolfsburg manager Steve McClaren is keen to capture the Netherlands international in order to strengthen his side for their participation in the Europa League this term.
According to The Mirror, negotiations between the two clubs were heating up on Monday, but Babel must accept a move to Germany in order for the deal to be completed.
Babel, who has not impressed since coming to Liverpool from Ajax in 2007, has failed to play an important role under new Reds manager Roy Hodgson thus far.
Birmingham City were also interested in a move for Babel this summer, but it appears that Wolfsburg are the favourites for the Dutchman.
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