McCarthy, who is from Barnsley and began his playing career at Oakwell, had been 16/1 earlier on Tuesday evening.
Barnsley are searching for a new boss after Paul Heckingbottom's surprise departure to Leeds United - four days after he signed a new contract.
And the next Reds manager market has seen plenty of early movement, with Garry Monk, Simon Grayson and current frontrunner Danny Cowley among the early favourites.
It remains to be seen whether there is any substance behind those names, although McCarthy is - by his own admission - not every Ipswich fan's cup of tea, and may be attracted by the romance of a return to Barnsley, despite the Yorkshire side's precarious position a point above the relegation places.
The 58-year-old has spent the past five-and-a-half years at Ipswich, who he has led to a top-half finish on three occasions despite a limited budget.
Cowley (6/4), Grayson (5/2), Paul Harsley (9/2) and Monk (5/1) are all currently ahead of McCarthy in the betting.