Bayern Munich CEO Karl-Heinz Rummenigge has confirmed that Thiago wants to leave the club and they will look to sell him this summer.
The Spaniard had been heavily linked with the exit door at the Allianz Arena, with his contract due to expire in 2021.
Liverpool have been linked with the midfielder, of whom Jurgen Klopp is a big fan.
Now Rummenigge has told Bild that the Bavarians do not want to lose the 29-year-old for nothing in 12 months time.
"He's a great guy on and off the pitch. We negotiated with him and met all of his wishes.
"But he [Thiago Alcantara] wants to leave. It looks like he may want to do something new at the end of his career."
The German added: "We don't want to lose a player for free next year. I say that very clearly!"
Asked about interest from Liverpool, he continued: "We haven’t had any contact with Liverpool.”
Thiago joined the Bundesliga giants in 2013 from Barcelona and has won the league title in each of his seven seasons at the club.
This term he continued to be a regular despite the change in the dugout, playing 35 times in all competitions.
Since football's restart he has played just twice as he recovers from injury, but is set to feature in the German Cup Final this weekend.
It's reported Bayern will want around £31.5m for the midfielder, who has played over 200 times for the club.
Liverpool's midfield has been highlighted as their weakest area despite Klopp having a wealth of talent to pick from.
The Reds' recent success has, in part, been down to excellent recruitment and Thiago would be an excellent acquisition provided the two club's could agree on a fee.
"They’ve been linked with Bayern Munich’s Thiago and of course he’d be a serious addition to that side," says former Anfield star Glen Johnson.
"He’s been top-class for a number of years in both Spain and Germany and he’d be a very good signing if he did move to Anfield."
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