The Scotsman had a short eight-month spell at Ewood Park after guiding the team to just one win in 13 Championship matches this season.
According to The Mirror, Sherwood is being considered by Blackburn owners Venky's about returning to the club as manager.
The former midfielder spent seven years playing for Rovers, captaining the team to the Premier League title in the 1994-95 campaign.
The report claims that Blackburn director Paul Senior is playing a pivotal role in the hiring process, which could be good news for Sherwood as he worked with him at Tottenham Hotspur.
Since November, Sherwood has been working as Swindon Town's director of football.