Exclusive by Phil McNulty
Chief football writer
Liverpool will turn down Chelsea's £32m offer for unsettled Steven Gerrard.
Anfield chief executive Rick Parry told BBC Sport that Chelsea had made a bid for Liverpool's 25-year-old captain, who has told the Reds he wants to quit.
He said: "I can confirm we have had a bid from Chelsea and that it will be rejected by us."
Chelsea then said: "Following comments from Rick Parry, Chelsea can confirm the club has made an offer to Liverpool for the transfer of Steven Gerrard."
The statement from the Premiership champions, posted on their website, added: "The terms of that offer are confidential."
Gerrard met a high-level Liverpool delegation, led by Parry and chairman David Moores, on Monday evening after the England star's advisors called off contract negotiations earlier in the day.
They made Gerrard the biggest contract offer in the club's history - a two-year extension to his current deal, which already has two years to run, on £100,000 per week.
They were told he would go away and sleep on the deal - but he told Parry on Tuesday he wanted to leave.
Liverpool manager Rafael Benitez has made it clear the club do not need to cash in on their prize asset to fund other deals.
"We don't need more money - we don't need to sell Stevie," he told www.liverpoolfc.tv.
"We have a clear idea of who we want and the players want to come here and play for the European champions.
"Maybe we need a little, but not too much - we don't need a lot more money. The fans need to understand that.
"My idea is that we want him to stay - that is what the chief executive and the board all want. We will talk with the player, the agent and we will try to find a solution. We will try right until the end."
Real Madrid confirmed their interest on Tuesday in the England star, who has two years left on his current deal at Anfield.
They now appear set for a bidding war with Chelsea for the services of Gerrard, who is thought to be upset that Liverpool did not place a high enough priority on the contract negotiations.
Chelsea's offer was higher than the previous British record buy, which was set at £29.1m when Manchester United bought Rio Ferdinand from Leeds in 2002.
But the feeling in Spain has always been that Gerrard would not leave Liverpool for another English club - which has encouraged Real.
Bernabeu director of football Arrigo Sacchi said on Monday: "Of course we are interested in him, what big club isn't?"
But Sacchi suggested Gerrard would have to hand in a formal transfer request first.
"Until the player makes a move we are not going to be involved in a fight for his services."
Sacchi also rubbished rumours that Real and Chelsea had a deal aimed at keeping the price down for Gerrard.
He said: "We have no agreement with Chelsea. How could we when our clubs are always interested in the same players?"
According to reports, Gerrard currently earns £60,000 per week at Anfield. It is claimed Real will pay him up to £130,000 per week, with Chelsea going no higher than £90,000.
Liverpool chiefs are thought to be surprised at the speed with which negotiations to keep their captain dissolved.
Parry said on Monday: "We still hope this situation is repairable. We are completely surprised by the comments (from Gerrard's agent).
"Rafa Benitez wants Steven to stay and couldn't have made it any clearer.
"We have made it clear since January we wanted to talk to Steven about a new contract.
"For anyone to make an issue of a delay of just a few days makes no sense. When we met on Wednesday, things were fine.
"We have wanted to keep Steven all along. There has never been any suggestion we wanted to sell him.
"Money is not an issue. There are no financial concerns regarding Steven's contract so any suggestion to the contrary is wrong."
And Benitez, speaking at a media conference to announce four new signings, added: "We tried last season three times to talk to Steve about a new deal and he said we need to wait."
Meanwhile England coach Sven-Goran Eriksson told BBC Radio Five Live that Gerrard's chances of being picked for the national team would not be affected if he chose to join Real Madrid.
"Look at David Beckham, Michael Owen, Owen Hargreaves. They are playing outside (England) and playing well in the national team every time they are picked - and they are always picked."