The Eagles are looking for a new manager following the departure of Roy Hodgson and had been edging towards appointing former Wolves boss Nuno.
Talks did not reach a positive conclusion however and now Crystal Palace have settled on Favre as the man they want.
The onus is now on the Frenchman to decide whether he wants to take the job at Selhurst Park.
The 63-year-old is without a job and has been unemployed since being sacked by Borussia Dortmund in December last year.
Favre is an experienced manager and, in addition to Dortmund, has taken charge of Servette, FC Zurich, Hertha Berlin, Borussia Monchengladbach and Nice.
He has enjoyed success, winning the Swiss Super League twice, the Swiss Cup twice and the German Super Cup once.
It remains to be seen if the Swiss tactician will decide that Crystal Palace represent the best next step in his managerial career.
