The former Chelsea manager has been heavily linked with Aston Villa in recent weeks.
Aston Villa are currently looking for their next manager having been without a permanent boss since Remi Garde was sacked.
For a long time it had appeared that former Leicester City boss Nigel Pearson was the frontrunner, although that has changed in recent weeks.
Di Matteo has become the favourite for the job instead, with new Aston Villa owner Tony Xia, who completed a takeover of the club this week, keen on making him his first managerial appointment.
However, it seems they could now miss out on the Italian as he has opened negotiations to take charge at Lazio, according to Sky Sports.
Di Matteo was reportedly in Italy in Rome on Saturday for talks about replacing Simone Inzaghi at the helm.
Should he end up at the Serie A side, it will surely see Nigel Pearson take over at Villa Park ahead of next season.
He has vast experience in the Championship, and has been successful too, having led Leicester City from the division two years ago.