German giants Borussia Dortmund are closing in on the signature of Armenia midfielder Henrikh Mkhitaryan, the Bundesliga outfit said.

Dortmund released a statement saying they have come to an agreement "in principle" with the 24-year-old and his current club Shakhtar Donetsk, although "the details need to be sorted out".

The news will come as a blow to Liverpool, who were also interested in Mkhitaryan who scored 25 goals in 29 Ukrainian Premier League matches last season.

He is expected to cost Dortmund €23m, according to press reports, and will sign a four-year deal.

Dortmund finished second in the Bundesliga last season and can look forward to another campaign in the UEFA Champions League, where they reached the final in May before losing to Bayern Munich.

Borussia see Mkhitaryan as the ideal playmaking replacement for Mario Gotze, who left to join Bayern at the end of last season.