The 28-year-old defender is out of contract in the summer and Bayern Munich have called off talks over a new deal with the player.
Unless something changes drastically, Alaba will be leaving the German champions at the end of the season and several clubs have been queuing to land him on a free transfer.
As many as five clubs have been in contact with the defender’s agent to discuss a deal and it has been claimed that Liverpool are amongst them.
The Reds signed Thiago Alcantara from Bayern Munich last summer and now have their eyes on his former team-mate Alaba.
The Reds are interested and keen to add his experience to their squad on a free transfer at the end of the season.
Manchester City are also believed to be interested, with Pep Guardiola keen to work with his former player.
But Real Madrid are the ones who are leading the race to land the defender on a free transfer next summer.
Negotiations have been progressing steadily and the Spanish giants are confident of working out an agreement with Alaba.