The 20-year-old, who has been in excellent form for the Reds this season, recently rejected a new £100,000-a-week deal at Anfield, saying that the "timing was off" and he would only be opening contractual talks after the end of the season.
Although this action from Sterling has put his future at the Merseyside club in doubt, Liverpool manager Brendan Rodgers has made it crystal clear that the England midfielder will not be allowed to leave this summer irrespective of whether he signs a new contract or not.
However, according to the Daily Star, the Reds are reportedly willing to reconsider their current stance on Sterling if Arsenal, who are believed to be one of the youngster's main suitors, are willing to pay £20 million along with Walcott in a cash plus player deal.
Rodgers is reportedly a big fan of Walcott and is believed to be keen on landing him despite the England winger making very limited appearances for Arsenal this season and the last due to injuries.
The 26-year-old forward, who completed a move from Southampton to Arsenal in the summer of 2006 for a transfer fee of £5 million (increasing upto £12 million depending on appearances for club and country), is due to hold talks with the Gunners, with his current contract set to expire at the end of next season.
Walcott may be willing to move to Liverpool as he has fallen down the pecking order at Arsenal especially after the arrival of Alexis Sanchez last summer.
Meanwhile, Arsenal boss Arsene Wenger says he has always believed that a successful squad should have a mix of experienced players as well as youngsters.
Over the years the Frenchman has always given opportunities to many youngsters including Thierry Henry, Cesc Fabregas and Robin van Persie.
However, at the same time, the Gunners squad has also always consisted of experienced players.
Arsenal's current squad also has both youngsters as well as experienced players, and Wenger feels that this is very important for a team to be successful.
"You want to do both," Wenger told Arsenal's official website. "Yes of course it is possible. We signed players like Sanchez and Ozil, 25 and 26, and that is a good age to perform now.
"We have as well players like Bellerin and Chambers who are 20. So we have both. The financial potential should allow you to combine both.
"When all your main players get close to 30, you can't buy a 30 year old player. You have to buy a player who is 22 or 23, because if you buy another player of 30 they all [finish their careers] together."