Carlo Ancelotti has reached an agreement in principle to become the next Everton manager, Sky Sports News understands.
Negotiations between Everton and Ancelotti progressed well following the Italian's arrival on Merseyside earlier on Monday.
It is understood confirmation of Ancelotti succeeding Marco Silva could be announced before Wednesday's Carabao Cup quarter-final against Leicester.
Everton revealed caretaker boss Duncan Ferguson will be in charge for the visit of Brendan Rodgers' side, with the former Blues striker set to remain as part of the first-team coaching staff, should Ancelotti be appointed.
Ancelotti, who was sacked as Napoli manager last week, emerged as a primary target for Everton's majority shareholder Farhad Moshiri and chairman Bill Kenwright since Silva's departure on December 5.
The 60-year-old won the Premier League, the FA Cup and the Community Shield during his tenure at Chelsea from 2009 until 2011, and has lifted three Champions League trophies over the course of his managerial career.
Ferguson was subsequently placed in temporary charge of the Toffees and has overseen a 3-1 win against Chelsea at Goodison Park and a 1-1 draw against Manchester United at Old Trafford on Sunday.
Shanghai SIPG boss Vitor Pereira - understood to have initially been the leading candidate to replace Silva - pulled out of the process last week.
Other candidates believed to have been under consideration include former manager David Moyes, but his appointment would have been seen as more of a short to mid-term decision.
Everton, who are three points above the Premier League relegation zone in 16th place, host Arsenal at Goodison Park on Saturday.
Everton: No managerial offer has been made
The club released a statement on Monday evening in which they said they have met a number of candidates about the vacancy but no contract offer has been made.
A statement read: "In the 11 days since Marco Silva left the club, the Everton board has been working to recruit a new permanent manager - and has held meetings with a number of candidates.
"We can confirm that thus far no contract offer has been made and no candidate has chosen to withdraw from the process.
"While the club is keen to confirm a new permanent manager as soon as possible, the only important duty is that the right appointment is made."
"While our process continues, Duncan Ferguson will remain as caretaker manager and will take charge of the side for Wednesday night's Carabao Cup quarter-final against Leicester City."
'Ancelotti right at the top of football'
Analysis from Sky Sports' Jamie Carragher on Monday Night Football…
"I have to take my hat off to them if Everton pull this off.
"The supporters have been complaining a lot about managers they've had in the past and why not, rather than spending a lot of money on the pitch, give them one of the real elite managers on big-money wages. It is wise to bring someone in who's a real top football coach.
"In Ancelotti you are getting someone who is right at the top of football. This is a man who Evertonians, if it comes off, can say has won more than Jurgen Klopp and has won Champions Leagues. It gives them something to buy into with that manager.
"Still, I can't change my view that whether it was Arsenal or Everton, I'm not sure he is the man for these types of jobs. I think that no matter how successful Ancelotti has been in the past he's never really had this type of job or certainly excelled in this type of role, but as I've said he hasn't had it before."