Despite struggling to hold down a regular first team place in Rafael Benitez's side, the Israel captain still managed to score 11 goals in his debut season.
He starred in Liverpool's record Champions League victory over Besiktas last November, scoring a hat-trick as the Reds ran out 8-0 winners.
So far this summer, Liverpool have allowed John Arne Riise to join Roma for �4m as Benitez looks to build a squad capable of challenging for the title next season.
The Liverpool boss has also turned down a �9m offer from Portsmouth for striker Peter Crouch, while he is set to follow-up the signing of Swiss full-back Philip Degen with the capture of Italian left-back Andrea Dossena from Udinese.
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