The red side of the city's football clubs was formed at the pub, which is situated less than half a mile away from Anfield football ground, in 1892.
The success of the club and the pub is one and the same claims its owner Kate Stewart, who estimates there are more than 5,000 punters buying pints on match days.
Hotel rooms will be added to the site and the pub transformed into a tourist destination itself, in a planned £1m expansion. The site already has five large function rooms.
It is hoped the new rooms will be open in time for autumn fixtures, with Liverpool FC set to play Cardiff City and Fulham on 27 October and 10 November respectively.
Stewart said: “We're thrilled to be expanding The Sandon pub and creating a hotel. Anfield should be a tourist destination in its own right and this will allow football fans to stay in the area.
"We'll be offering our popular and outstanding hospitality service, but with the added benefit of staying right in the heart of Anfield.
"The hotel will be a fantastic addition to the area."
Stewart bought the pub last year and has since expanded its role in the local community, in addition to setting up a hospitality partnership between the pub and Liverpool FC.
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