Terry is keen to follow former England teammate Steven Gerrard to the Saudi Pro League.
The Chelsea legend is believed to be a number of potential candidates for the position.
Terry is currently working as a consultant for Chelsea's academy but now looks set to join the influx of stars heading to the Gulf State.
Al Shabab are not one of the big clubs in the league and currently sit second-bottom of the Saudi top flight with just two points from their opening five matches this season.
They have a number of recognised players in their ranks including ex-Wolves defender Romain Saiss, Argentina midfielder Ever Banega and former Atletico Madrid star Yannick Carrasco.
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Terry's first match in charge of the club could be for their league clash against Al Feiha on September 15.
The 42-year-old brings a history of success with him having won five Premier League titles, a Champions League and five FA Cups - making him Chelsea's most decorated player ever.
Since retiring from playing in 2018, Terry has held assistant manager roles at Aston Villa and Leicester, both under the guidance of Dean Smith.
A move to Al Shabab will see Terry come up against Liverpool legend Gerrard, who became manager of Al Ettifaq in the summer. Meanwhile, Reds icon Robbie Fowler is in charge of Saudi First Division League club Al Qadsiah.