Sancho is one of European football’s hottest properties, despite a season blighted by disciplinary issues at Borussia Dortmund.
The 19-year-old England international has 10 goals and 11 assists in all competitions this season, while last term he banged in 12 goals and provided 17 assists.
Sancho looks set to leave Dortmund for around £120million, whether that is in January or next summer, with Barcelona also interested in the teenager.
“I’ve heard quite a few people say that Liverpool need another forward and I can understand that,” Hughes said on The Athletic podcast. “It’s quite clear that Liverpool would quite like to sign Jadon Sancho.
“Jurgen Klopp made a big revelation last season that Liverpool wanted to sign him from Manchester City but found it impossible because of the club rivalries that exist and various reasons, and that story got buried a bit because I think it was around the Bayern Munich game if I remember correctly.
“It’s quite clear that they’re monitoring his availability and if he was available, Liverpool would have the money to sign him.
“It’s whether he’s available at that time and whether it correlates with Liverpool’s needs at that time.”
Hughes said Liverpool are the most attractive proposition at the moment due to last season’s Champions League triumph and their eight-point lead at the top of the Premier League.
He added: “It looks to me like Jadon Sancho, as a forward can play right, sometimes plays left.
“Jurgen Klopp is the sort of manager who likes to move players about, could play him through the middle.
“He’s agitating for a move quite clearly away from Borussia Dortmund at the moment.
“If he wanted to move back to England and Liverpool wanted him, Liverpool are going to be ahead of Manchester United in the pecking order.
“There’s no doubt about that. Liverpool are a much better team at the moment, more attractive.”
Sancho, 19, was left out of the Dortmund squad to play Borussia Monchengladbach in October after returning late from England duty, and was also fined a week’s wages.
He was also benched for Dortmund’s Champions League clash against Barcelona last month after reportedly turning up late for a team meeting – although he came on in the second half and scored.
Also last month, Sancho was hauled off at half-time during a 4-0 defeat to Dortmund’s Bundesliga rivals Bayern Munich.