Pearce turned the job down last week, citing personal reasons, but it is understood that Forest are now in talks over a longer contract offer.
Former England U21 manager Pearce, who spent 12 years with Forest as a player, was strongly linked with the position after Billy Davies was sacked last week.
The 51-year-old was caretaker manager at the City Ground during the 1996-97 season before going on to manage Manchester City.
Malky Mackay, Steve Clarke, Roberto Di Matteo, Neil Warnock and Gianfranco Zola have also been linked with Forest since Davies' departure, but it appears Pearce is now owner and chairman Fawaz Al Hasawi's first choice.