The 19-year-old forward has a year left on his contract at Anfield and it's believed the Reds are willing to sell for around £10million.
It's understood the player is interested in moving to Molineux, where he made his professional debut last season as part of the youthful Liverpool team beaten 2-1 by Wolves in the FA Cup.
Camacho started at right-back that day and also when he came on as a late sub in a Premier League win over Crystal Palace, his two senior appearances to date.
He later hit out at his club after scoring a hat-trick for the under-23s when playing on the right side of a front three.
Camacho said at the time: "I do not know whose idea it is, but I will prove that they are mistaken about my football.
"I'm not a right defender, I'm an attacker who scores goals. This is my DNA."
No fee has yet been agreed but Wolves will look to offer the teenager a long-term deal as they try and beef up their squad with young talent ahead of the club's return to European football next season.
The Portugal Under-19 international scored eight goals in 14 appearances for Liverpool's under-23 side last season. He progressed through Sporting's academy as a boy before moving to Manchester City aged 13 and then to Liverpool three years later.
Wolves have identified a number of positions to strengthen this summer including a centre forward as competition for striker Raul Jimenez – with Baggies' striker Salomon Rondon a confirmed target – a forward and a centre-half.