Milner, 37, is out of contract with Jurgen Klopp's team this summer and will be available on a free transfer.
Brighton are keen to add experience to their youthful and talented squad and see the former Leeds, Newcastle, Aston Villa and Man City man as the perfect fit.
It is thought Milner, who has 61 England caps to his name, is impressed with the project at Brighton and likes the style of their head coach Roberto De Zerbi.
The Italian has worked well with his veteran players such as Adam Lallana, Lewis Dunk and Danny Welbeck – and Milner could have a similar positive influence on the squad on and off the pitch. Milner can play anywhere across the midfield and also at right back and has made 38 appearances for the Reds this season and 225 in total since arriving at Anfield from City in 2015 for £26m.
Here's how he could fit in Roberto De Zerbi's Brighton starting XI for next season...
1. Jason Steele - GK
Deservedly has the No 1 spot from Rob Sanchez. Suits De Zerbi's style of play perfectly. Photo: Gareth Copley
2. James Milner - RB
The Liverpool man is set to join on a free transfer this summer. The former England international can play a variety of roles but right back could be the most useful as Tariq Lamptey continues to struggle with injury and Joel Veltman's fututre remains unclear Photo: Andrew Powell
3. Lewis Dunk - CB
The skipper has been excellent once again this season and the veteran has improved further under De Zerbi Photo: Mike Hewitt
4. Adam Webster - CB
The defender has had his injury troubles this season but Brighton are a better team when he plays at his best Photo: Mike Hewitt