The club have also decided what they want to do with John Carver, after his disappointing spell as interim manager.
The ex-Derby County boss, who left the Midlands club last month after they missed out on the playoff spots in the Championship, is said to have held talks with the Magpies' board this week before going off on holiday ahead of a final decision.
McClaren was derided after his disappointing tenure as England manager, with the Three Lions failing to qualify for Euro 2008, but he rebuilt his career somewhat by winning the Eredivisie with FC Twente in his first job after that
The 54-year-old also had short-lived spells in charge of Wolfsburg and Nottingham Forest, before taking over at Pride Park.
Sky Sports also report that this season's interim manager John Carver will revert back to his previous role of first-team coach, after discussions with managing director Lee Charnley.
McClaren cut his teeth in management in the North-East, spending five years at Middlesbrough and leading them to their first ever top-level trophy, with the League Cup in 2003-04. He also took Boro into Europe, where they were runners-up in the Uefa Cup.
If Newcastle do announce the former England boss as manager at St James's Park, they will be hoping he can be just as successful as he was at the Riverside, and bring them the long overdue cup trophy they've been waiting for.