The 28-year-old midfielder has agreed personal terms with the Reds and will undergo a medical in the next 48 hours.
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Cole becomes the Anfield club’s second summer signing following the capture of Milan Jovanoic and represents a huge coup for new manager Roy Hodgson as he looks to rebuild following a disastrous season which saw the Reds fail to qualify for the Champions League.
Cole’s contract at Chelsea expired at the end of June and he was left a free agent following a failure to reach a new agreement at Stamford Bridge.
Chelsea manager Carlo Ancelotti has stated his disappointment at losing a player who has represented his country 56 times, but claims the loss was purely economic.
"It was a problem between the club and Joe Cole, not me," said the Italian.
"We spoke about this but when the problem is with money, it is not my problem. It is difficult to keep a player all the time in one squad."
Cole won three league titles and two FA Cups during a seven-year spell at the West London club following a move from West Ham.
By Jamie Bowman
