The Frenchman emerged as a top target for the Reds ahead of the summer window, amidst him being heavily linked with a move away from Monaco.
Liverpool are keen on bolstering their midfield in the summer, and Tchouameni was one of the players they had firmly on their transfer radar, although they were facing strong competition from Spanish giants Real Madrid.
It was claimed that the Merseyside giants moved ahead of Los Blancos in the race for the 22-year-old’s signature, and he was also preferring a move to Anfield.
However, Real Madrid were not planning on giving up on their efforts to snap up Tchouameni and have been in talks with the player’s entourage.
And according to French radio station RMC, the Madrid giants have won the race for the Monaco star’s services, which is a blow for Liverpool.
Real Madrid have agreed a deal with Monaco for Tchouameni for a fee in the €80m range in addition to bonus payments.
Tchouameni is set to put pen-to-paper on a five-year-deal at Real Madrid.
It remains to be seen whether the Reds will turn to alternative targets in the upcoming window.