Tchouameni, 22, is one of Europe's rising stars after a phenomenal season at AS Monaco where he has flourished in Ligue 1.
The French defensive midfielder made 50 appearances, scoring five goals whilst contributing three assists.
Fabrizio Romano reports that Real Madrid have secured the move for Tchouameni with a fee of €80m plus add-ons to €100m being agreed with Monaco.
But Tchouameni had interest from both Liverpool and Paris Saint-Germain as well as Los Blancos.
Klopp even reportedly phoned the Frenchman in a bid to persuade him to join the Reds but the midfielder declined the German's offer.
PSG, meanwhile, offered Tchouameni the best proposal of the three interested clubs but still the 22-year-old desired a move to the Santiago Bernabeu.
He is set to be announced once Madrid have confirmed Luka Modric's new contract with that confirmation likely to come tomorrow (per Romano).
Rival fans have mocked Liverpool's failure to sign the midfielder, belittling the fact Klopp was denied in his attempts through a phone call.
Here are some reactions from fans over the news on Twitter:
Real Madrid beat Liverpool once again following Champions League final defeat
It's become a constant theme with Madrid getting the better of Liverpool having just beaten the Reds in the final of the UEFA Champions League.
Jurgen Klopp's side went into the final in Paris as slight favorites to lift the Champions League trophy.
But Real Madrid's incredible campaign featuring three iconic comeback victories over PSG, Chelsea and Manchester City came to a perfect ending on May 28.
Vinicius Jr grabbed the only goal of the game at the Stade de France, ending Liverpool's quest to avenge their 2018 agony.
The Reds lost yet another Champions League final to Madrid after suffering a 3-1 defeat on a agonizing night in Kiev back in 2018.
They've once again suffered another setback at the hands of Los Blancos, with Madrid signing one of Europe's most sought after midfielders.
Jurgen Klopp will be sick of the sight of the La Liga champions who continue to be a huge nuisance.
They will now have to turn their attention elsewhere having missed out on their top transfer target.