Dominic Solankes proposed loan move to Crystal Palace has broken down amid cocerns over the strikers fitness.
The 21-year-old moved to Liverpool from Chelsea 18 months ago but has struggled to force his way into Jurgen Klopps first team and is yet to make a single first team appearance this season.
Klopp insisted Solanke would be unable to play any part in Liverpools festive programme due to muscle problems which has prompted Roy Hodgson to focus attention elsewhere.
Despite their shock win over champions Manchester City at the Etihad last weekend, Palace remain embroiled in a relegation fight and have been struggling for goal.
The Eagles are just four points from safety with strikers Alexander Sorloth, Christian Benteke, Jordan Ayew and Conor Wickham all yet to score a goal in the Premier League this season.
According to The Sun, Palace want a striker capable of making an instant impact and cannot afford to wait until Solanke is match fit.
Jurgen Klopp refused to confirm whether or not the England Under-21 international would still be a Liverpool player at the end of the month but it is understood he is happy to sanction a loan deal, with Bundesliga club Schalke now emerging as strong contenders to sign a player who cost the Reds £5million after a tribunal.
More: Liverpool FC