McClaren, who was sacked by Derby in March, is returning to England after leaving his position as a coaching consultant with Israeli side Maccabi Tel Aviv.
Following the news, the 56-year-old has surged to the front of the betting to become Wednesday's next manager. McClaren went from 18/1 to 5/6 with one bookmaker [Sky Bet], with previous favourite Paulo Fonseca, currently of Shakhtar Donetsk, drifting to 4/1.
Former Brighton and Sunderland boss Gus Poyet is another interesting mover, with his odds cut from 20/1 to 11/1 on Thursday.
As well as Derby, Yorkshireman McClaren has managed Middlesbrough, Nottingham Forest, Newcastle, FC Twente, Wolfsburg and England, with mixed success.
Sheffield Wednesday currently sit 14th in the Championship, having finished fourth and sixth in the past two campaigns.
Could McClaren be bound for Sheffield Wednesday?