Lee was on Thursday instantly earmarked as a potential replacement for coach Alex Miller, who has left the club to take up a management position in Japan.

Initially Benitez would say only, "we have several names under consideration", but he pointedly refused to rule out Lee's return to Anfield.

But sources at the club claim that Lee is Benitez's first-choice for the post and co-owners George Gillett and Tom Hicks have been asked for their approval.

Benitez has not had an assistant since Pako Ayesteran left the club under a cloud earlier in the season - he is still on 'gardening leave'.

Miller was officially a coach rather than assistant, but Benitez now seems certain to appoint a replacement for the more senior role.

Lee's appointment would crucially give Benitez a club legend and Merseyside man at his side. A criticism of the manager's backroom staff has always been that it has too many Spanish coaches without local knowledge.

Lee was sacked by Bolton earlier in the season after taking over from Sam Allardyce as manager, having previously worked as a coach under former Liverpool boss Gerard Houllier at Anfield.

In an eight-year playing career for the Reds, Lee amassed a glittering array of honours that included three league titles, two European Cups and four League Cups.

Lee moved on to QPR, Osasuna, Southampton and Bolton as his playing career came to an end and returned to Anfield in 1993 as reserve coach under Graeme Souness. He was promoted to first-team coach by Houllier in 1999.

In July 2004 he left Anfield for a second time to become a full-time member of the England coaching set-up.

He was given his first full-time managerial job at Bolton in March 2007 but survived just 14 games and has been out of the game since then.