The Beady Eye frontman is said to have replaced his ex-Oasis bandmate and brother Noel Gallagher for the gig, reports The Sun.
Noel Gallagher apparently turned down the chance to perform at the event after giving the invitation some thought.
"A couple of months back the Olympic production team got in touch with Noel about playing his part in the closing ceremony," a source said. "Along with his manager, they thought long and hard about it. It was a big temptation, with 650 million people expected to tune in on TV.
"But he knocked it back in the end - he has been on a great tour and he doesn't really need to do it. The organisers asked Liam if he was game, and he said yes. The Who are on the same bill, so he was well up for it.
"The team wanted something quintessentially British - a real flag-waving, singalong moment to show the rest of the world what this country has produced. Oasis were exactly that and, whether it's Noel or his brother Liam, they just wanted a bit of rock 'n' roll in there."
Liam Gallagher will reportedly perform Oasis classic 'Wonderwall' during his set.
The Who, George Michael and Take That were recently among the list of artists named on a leaked lineup for the Olympics closing ceremony, which takes place on August 12.