Blues, on the back of their summer takeover, have enjoyed a strong start to their Championship campaign, accumulating 18 points from 11 matches.
On the back of a 17th-placed finish last season, their equal-best for seven years, Birmingham sit in sixth position in the standings, yet the decision has been made to sack head coach John Eustace.
In a statement on Monday, the West Midlands outfit said that they would appoint a replacement who "will be responsible for creating an identity and clear 'no fear' playing style".
However, it had been claimed in the days before Eustace's departure that Rooney had already been identified as their chosen alternative.
The Englishman has most recently been at MLS side DC United, where he would record just 15 wins from his 53 matches in charge of the Washington-based outfit.
Last week, the club announced that they were parting ways with Rooney by mutual consent, feeling that their working relationship had run its course.
At the time, Rooney indicated that he did not have another job lined up, although the assumption was that his next role would come in England.
According to The Times, terms have now been agreed between the relevant parties for Rooney to be confirmed as Birmingham's next boss later this week.
The report says that the 37-year-old has been offered three times the wages that Eustace was receiving before his departure from St Andrew's.
With the international break having now started, Birmingham officials do not necessarily have to be in a rush to get a deal over the line.
Nevertheless, the expectation now is that Rooney will be in the dugout for the Championship encounter away at in-form Middlesbrough on October 21.
Rooney has already managed in English football, posting 24 wins and 22 draws from his 85-match stint with Derby County during a period where the Rams were heavily restricted by transfer embargos and points deductions.