Watford striker Jerome Sinclair
Watford paid £4 million to prise the striker from Liverpool during last summer's transfer window, The Liverpool Echo reported at the time.
But Sinclair has only played seven times for Watford so far and spent the second half of last season on loan to Birmingham City.
A general view of Sheffield United's Bramall Lane ground
According to Sky Sports, several second tier sides are also keen on signing the 20-year-old, but Sheffield United are 'hopeful' of completing a deal.
If the Blades' pursuit is successful, Sinclair would be their third loan signing from a Premier League club this summer, after Chelsea's Jamal Blackman and Tottenham Hotspur's Cameron Carter-Vickers.
New Sheffield United recruit Cameron Carter-Vickers
The Birmingham-born player was lured to Liverpool from West Bromwich Albion at the age of 14, and went on to make five appearances for the Reds.
He has also been capped by England at under-16 and under-17 levels.
Would Watford's Jerome Sinclair be a good signing for Sheffield United?