Hodgson's current contract at Craven Cottage expires at the end of the season and Fulham have moved after he was recently targeted by Sweden and Norway as the Scandinavian countries searched for new head coaches.
The former Inter Milan boss, 62, has been at the Cottagers' helm since December 2007 and guided the West London club to a seventh place finish in the Premier League and UEFA Cup football last season.
Contrasting fortunes: Danny Murphy (above) will sit out the clash with Liverpool while Roy Hodgson (below) is set to extend his stay at Craven Cottage
Meanwhile Fulham's former Anfield star Danny Murphy is still struggling ahead of tomorrow's clash at home against Liverpool with a knee injury and misses the match.
Andy Johnson and Dickson Etuhu are also out but winger Simon Davies could return after a second operation on an ankle complaint.
For Liverpool, top scorer Fernando Torres is expected to start after recovering from a groin strain. But captain Steven Gerrard is a doubt, with manager Rafa Benitez fearing the England midfielder may require surgery on a groin injury.
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