Sky Sports later reported that the ex Inter Milan striker had arrived at Liverpool's Melwood training ground to complete the deal, which will not be confirmed in time for him to face former club Manchester City on Monday.
The Italy striker was seen leaving Melwood early on Friday evening, with no official announcement made but an agreement expected this weekend.
Balotelli, 24, is seen as a replacement for temperamental forward Luis Suarez, who joined Barcelona for around £75m earlier this summer.
Reports emerged on Thursday night that the Anfield club were in talks with the mercurial 24-year-old after agreeing a £16 million fee with Milan, with Balotelli reportedly telling journalists that it would be his last day at the Rossoneri's Milanello training ground.
Milan followed that later with a statement on their website revealing Balotelli had said his farewells to his team-mates.
Many of Friday morning's papers reported that Liverpool intended to insert "conduct clauses in his contract", which had led to speculation that the deal may fall through. However, it has now been confirmed that the mercurial forward travelled to Liverpool on Friday afternoon to seemingly complete the formalities of the deal.
Liverpool have been looking for a marquee striker to replace the departed Suarez, but their interest in Balotelli represents a remarkable about-turn from three weeks ago.
When the Merseysiders played Milan in a friendly in the United States, manager Brendan Rodgers expressed admiration for Balotelli but "categorically" said he was not a target.
Balotelli is a proven performer and scored 16 times for Milan last season, as well as Italy's winner in the World Cup opener against England in Manaus.
But the baggage that comes with him is considerable. His spell at City from summer 2010 to January last year was a whirlwind one, with occasional sparkling performances interspersed with volatility on the field and erratic behaviour off it.
His numerous misdemeanours famously included fireworks being set off in his bathroom, throwing a dart at a youth-team player and training-ground bust-ups with team-mates and manager Roberto Mancini.
On the positive side he played a key role in the 2011 FA Cup win and contributed to the following year's Premier League success, but he also hindered progress by accruing four red cards.
City eventually tired of the circus surrounding him and offloaded the former Inter Milan player to his boyhood club AC Milan, at a £6million loss, for £19million.
Remarkably, if discussions with Liverpool advance, he could be back at the Etihad Stadium next week as the Reds travel to Eastlands in the Barclays Premier League.
"It's my last day at Milanello," Balotelli said on Sky Italia, fuelling the speculation.
The Serie A club's website, www.acmilan.it, later reported: "Mario Balotelli left Milanello's sporting centre at 13.30, after saying goodbye to his team-mates.
"Before leaving the premises, the striker has said goodbye to members of Milan's press office."
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