Pearce, who played for the club for 12 years, turned down the job for personal reasons last week following initial talks.
However, the former England Under-21 boss remains the Reds' preferred choice to replace Billy Davies, whose second spell in charge was brought to an end last Monday when he was sacked.
It is understood that Forest owner and chairman Fawaz Al Hasawi will offer Pearce a longer contract than the one previously on the table in an attempt to persuade the Reds cult hero into what would be an emotional return to the club.
Pearce would be a popular choice amongst Forest fans. The tough-tackling left-back spent the majority of his career at the City Ground where he twice won the League Cup under Brian Clough.
During his final season on the banks of the River Trent in 1996/97 he also had a brief spell as caretaker manager.
A relatively successful spell in charge of the England Under-21 side followed during which time Pearce guided the Young Lions to the final of the UEFA Under-21 Championship in 2009 where they lost 4-0 to a talented Germany team.
Pearce took charge of the Great Britain Olympic football team at the London games in 2012 and that was his last involvement as a coach or manager.
Pearce became the second prospective candidate to turn down the chance to succeed Davies after Neil Warnock rejected the Reds claiming that he was unhappy with the conditions of the job.
Last Thursday Al Hasawi revealed that Steve Clarke, Malky Mackay and Gianfranco Zola were all on his shortlist of candidates and that he was aiming to have a new manager in place by the end of this week.
Academy manager Gary Brazil has taken charge of first-team affairs for the games against Charlton and Ipswich since Davies' dismissal, losing at home to the Addicks before drawing at Portman Road on Saturday.
With seven matches remaining, Forest are currently seventh in the Sky Bet Championship and two points outside the play-off places following a 10-match winless run.
- Sports & Recreation
- Billy Davies
- Fawaz Al Hasawi