The Frenchman stepped down as a pundit earlier this year to make a move into management and could land his first top job in a matter of weeks.
Henry is being viewed as the man to save Villa's season, who have slumped to 15th place in the table having only won three games.
And according to the Daily Mail, Terry will form part of Henry's management team as he already knows the players and how the club is run.
The 41-year-old former Arsenal star would help boost Villa's profile and the owners are reportedly prepared to throw cash at the situation to give Henry what he wants.
Villa's hierarchy want them back in the Premier League sooner rather than later.
Terry lived through the heartache of last season where Villa came close to returning to top-flight, but lost out to Fulham in a dramatic play-off
He was the former manager's big signing, but his contract wasn't renewed when they missed out on promotion.
Steve Bruce was sacked last week after two years at the club and Terry was the favourite to fill his place.
But Henry is thought to be the more experienced man for the role, but will call on Terry for his knowledge of the club.
The pair were once fierce rivals and have more than 600 Premier League appearances between them, as well as whole host of silverware.
Henry retired from playing in 2014, while it is not yet known if Terry will announce his retirement as a player.
The Frenchman is currently Roberto Martinez's No2 with the Belgium national team.
Henry helped guide them to third place at the World Cup this summer.
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