The Tricky Trees have been without a manager for three and a half months.
Sanchez has been sworn in by Olympiacos
The Greek champions, whose owner Evangelos Marinakis is set to acquire an 80 per cent stake in Forest, had earlier announced the resignation of Marco Silva - who is now the new favourite to take over at the City Ground.
New Forest candidate Marco Silva
Sanchez had previously led the bookmakers' list, with Forest hoping to appoint Dougie Freedman's successor this week, according to the Nottingham Post.
The paper reported that Sanchez, who was sacked by Deportivo La Coruna last month, was being considered alongside compatriots Julen Lopetegui and Michel, under whom he previously worked as assistant manager at the Georgios Karaiskakis Stadium, as well as with Getafe and Sevilla.
Another reported candidate, Michel, was Sanchez's boss at three clubs
Forest, who finished 16th last season, remain the only side in England's second tier without a manager as pre-season looms.
The Nottingham Post reported this week that the club is likely to make an overseas appointment for the first time in their 150-year history.
General view inside the City Ground