Brendan Rodgers will demand £20million in cash as well as Walcott to release Sterling this summer and it seems Arsene Wenger is tempted. Both players seem discontented with life at their current clubs and a swap deal could work out best for all parties.
As has been well documented, Sterling has rejected a £100,000-a-week deal with Liverpool and has postponed contract talks until the summer. There seems to be concern from the 20-year-old that the he will not be able to play regular Champions League football or compete for major trophies at Anfield.
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Sterling has two-years remaining on his current deal so Liverpool are not under intense pressure to cash in, but they know that if if a deal still isn't agreed by the summer of 2016, they will have to accept a transfer offer that could be significantly less than his market value.
Walcott is now at that stage. His contract has just 12 months to run and it seems negotiations over an extension on his £100,000-a-week deal are off to a bad start. The England international has struggled to regain his place in the team since injuring his cruciate ligament last January and may be concerned that he will never get ahead of Alexis Sanchez and Alex Oxlade-Chamberlain.
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Now 26-years-old, Walcott wants reassurances over his role in the first-team and Wenger may not be able to offer them. Meanwhile, Liverpool see Walcott as a perfect addition. They need a wide player who can chip in with 15-20 goals a season to supplement Daniel Sturridge and are interested in signing him.
Sterling has already admitted that he has been "flattered" by interest from the Gunners and he experienced first-hand how good Wenger's team are becoming after being on the receiving end of a 4-1 defeat at the Emirates Stadium.
He must surely see Arsenal as a better place to develop his career. The money will generally be the same. Wenger has more money to spend on wages but it is unlikely he will be offered much more than was on the table at Liverpool.
But Arsenal should now qualify for the Champions League and will also be one of the favourites for the title next season. Their incredible run in the second half of the season has seen them win 14 of their last 17 games in all competitions.
Walcott has played little or no part in that run and he will feel that he is now on his way out. Sterling will want to be a part of it. It's a good deal for everyone.
Would Arsenal and Liverpool fans be happy with this deal? Give us your opinion in the comment box below!