Downing, whose transfer from the Riverside Stadium in the summer of 2009 is not thought to have included a sell-on clause, has caught the eye of Kenny Dalglish.
And with Darren Bent on the verge of a £20m-plus move to Villa Park, Aston Villa are looking at ways of bringing in some money to help their transfer tinkering this month.
Villa manager Gerard Houllier is willing to listen to offers for most of his players and Liverpool are weighing up when to make their move, although the left-winger is one player who Villa are keen to keep.
Liverpool's interest means Sunderland will now have to act fast if they are to land the Middlesbrough-born winger.
But with Black Cats manager Steve Bruce's priority now on attracting a replacement for Bent, Sunderland are likely to look to Charles N'Zogbia who is a cheaper alternative.
Wigan's N'Zogbia, the former Newcastle winger, is likely to see his value dropped to around £6m in the summer.