Minogue, 40, who recently broke up with her boyfriend of four years Kris Smith, is apparently keen to return to the show, reported Sun online.
The move comes after insiders confirmed that former Destiny's Child singer Kelly Rowland will not be back for the new series later this year.
Negotiations with producers started a month ago, after her relationship with Smith broke down.
"Simon has always been a fan of Dannii's, and she is keen for a return to Britain after the end of her relationship with Kris," a source said.
"Rejoining the X Factor would be ideal. Producers are really keen to make it happen, and Dannii's team feel it would be the perfect move," the source added.
Minogue's recently disclosed affair with music mogul Simon Cowell, revealed in an unauthorised biography earlier this month, is said to be irrelevant to the decision.
She was a judge on 'The X Factor' for four series before moving to Australia full-time in 2010 after her last season in the UK finished. PTI CORR JCH
