Reds boss Jurgen Klopp is keen to bolster his midfield in the January transfer window as Liverpool chase Premier League, Champions League and FA Cup glory.
According to El Desmarque, Isco is the club's first choice target but Madrid's reluctance to accept a sizeable bid for the midfielder has seen them turn their attentions elsewhere.
The Reds are more hopeful of landing Ruiz, who has emerged as one of Europe's best midfielders since joining Napoli from Real Betis in 2018.
However, Liverpool are likely to have to pay more than the £47m they bid for Isco if they are to be successful in their pursuit of the 23-year-old.