The Spain Under-21 international has struggled to get regular game time under Zinedine Zidane at the Bernabeu.
Ceballos, 21, has started just two La Liga games this season, making a further eight appearances as a substitute.
And according to Spanish news outlet Don Balon, who are well known for their outlandish transfer claims, Ceballos is heading to Liverpool.
They say Real president Florentino Perez has given the green light on a deal to sell Ceballos to the Reds this summer.
Don Balon add that Jurgen Klopp sees the Real ace as the perfect long-term replacement for Emre Can at Anfield.
The Germany international is out of contact this summer, with the midfielder expected to quit the Reds for Juventus.
Don Balon also say that Perez is keen to include a buy-back clause in Ceballos’ contract if he heads to Liverpool at the end of the season.
The Reds are back in action on Saturday afternoon when Klopp’s men travel to West Brom in the Premier League’s early kick-off (12:30pm).
However, the Liverpool boss could rest numerous players with their Champions League semi-final clash with Roma coming up later this month.