The Premier League duo have been heavily linked with the Argentine in recent weeks, with rumours circulating that he will be allowed to leave the Stadio Olimpico.
A loan deal appeared to be the most likely option for both parties, with the pair keen to tie up a quick deal to strengthen their respective attacking lines.
However, Dynamo have offered Lazio £6.9m to conclude a permanent switch
With Zarate having only played one Serie A game this term, and having spent last season with Inter Milan, a move is likely.
His agent Luis Ruzzi said that his client is attracted to Dynamo and that contact has been made:
“We spoke with the Dynamo president about 10 days ago.” He is quoted by Sky Sports via Lalaziosiamonoi.it.
“Mauro was immediately left fascinated by their project. We are talking about a permanent transfer.
“The boy is happy, he’s married to the cause and there are no other alternatives for him – it’s either Lazio or Dynamo.”
Zarate spent a short while in England during 2008, signing on loan with Birmingham from Qatari giants Al-Sadd.
As well as Liverpool and Sunderland, Southampton were believed to be monitoring the situation.
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