Baroness Randerson said adding it to the Wales Bill on further devolution would give "clarity" on the issue.
Speaking ahead of a House of Lords debate on Tuesday, she also called on the new Conservative-majority UK government to devolve policing, youth justice and more power over energy.
She urged ministers to publish the full bill soon, not just a draft.
"No ifs, no buts, Wales must have fair funding," she said.
"We need clarity on this issue and the best way to tackle it head on is by entrenching it in the Wales Bill. People in Wales have waited long enough for this issue to be sorted out."
On the prospect of only a draft version of the Wales Bill being published by the autumn, Baroness Randerson said this was "simply not acceptable".
"Wales needs this Bill as soon as possible.  People will be voting in the Welsh elections next year and they should be told the extent of powers the assembly will have.
"Likewise, the political parties need this clarity for when they write their manifestos."
Fair funding for Wales should be guaranteed by law, a former Lib Dem Wales Office minister has said.