The 28-year-old was initially expected to be sidelined for up to six weeks after picking up the injury during City’s 3-1 win against Leicester City in the Capital One Cup on December 17.
But the Argentina international took part in training on Tuesday morning and, providing he suffers no setbacks during a session on Christmas Day, will be part of the matchday squad that hosts Brendan Rodgers’ side at the Etihad Stadium on Thursday.
Gael Clichy deputised at right-back for Zabaleta in City’s 4-2 victory over Fulham at Craven Cottage on Saturday.
Manuel Pellegrini’s side are currently one point behind Liverpool in the table and have won all eight of their Premier League fixtures at home this season.
City will be without Sergio Aguero for the match against Liverpool as the striker continues his recovery from a calf injury, while doubts remain over the fitness of Micah Richards, Matija Nastasic and Stevan Jovetic.
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