It has been reported that the 19-year-old has been deemed surplus to requirements at Stamford Bridge by Chelsea boss Thomas Tuchel, with the Blues set to sign Kalidou Koulibaly and Nathan Ake in that department.
The West London outfit are also said to be keen on Paris Saint-Germain's Presnel Kimpembe, thus forcing Colwill further down the pecking order despite the exits of Antonio Rudiger and Andreas Christensen this summer.
Colwill enjoyed a successful season-long loan spell with Huddersfield Town in the Championship last season, which has led to substantial interest in his signature from several Premier League clubs ahead of the 2022-23 campaign.
Everton have been amongst the interested sides earlier in the window, but the Daily Mail are reporting that both Leicester and Crystal Palace are planning on making their move for the England Under-21s international.
The report suggests that the duo have been alerted to the defender's availability following a host of defensive reinforcements at Chelsea, with a permanent deal now on the cards following a potential loan transfer in the past.
However, the Foxes are reportedly keen to sell before pursuing a move for Colwill, with Jannik Vestergaard among those that Brendan Rodgers is keen to move on during the transfer window before splashing the cash elsewhere.
Colwill came through the academy ranks at Chelsea prior to last season's loan move, where he made 29 league appearances in the second tier as the Terriers narrowly missed out on promotion to the Premier League, courtesy of the 19-year-old's own goal in the playoff final against Nottingham Forest back in May.