Forest have already brought in centre back Matt Mills and winger Jamie Ward on free transfer this summer, but manager Dougie Freedman needs more additions ahead of the new season.
The Daily Mail believe that Freedman wants to add another left back to his ranks this summer, and is pursuing Manchester United's James on loan.
James, 21, spent time on loan at Rotherham United and Huddersfield Town, and could well leave Old Trafford temporarily again given that first team football under Louis van Gaal looks unlikely.
The report states that Fulham and Wigan Athletic are also interested in signing James, meaning Forest may have to move quickly if they are that keen on loaning the left back this summer.
How much do Forest need a new left back?
Scot Danny Fox is far from popular at the City Ground after a string of poor performances last season, and fans may well want a new left back brought in to replace the former Celtic man.
James is a promising young left back who bounced back from his release at Preston North End in 2012 to became a regular in the United reserve teams, and could be a great signing for Forest if he continues to develop as he has over the last three years.
A loan deal would be financially sensible for Forest, but with interest from other clubs, Freedman may have to line up other targets just in case he can't sign James this summer.