Blues took the surprising decision to sack John Eustace following their win over West Brom over the weekend.
Birmingham are sitting sixth in the Championship but the club moved him on and insisted that they want the new manager to play fearless football.
Rooney decided to mutually terminate his contract with DC United over the weekend after they failed to reach the MLS playoffs for the second season running.
Talks have been taking place between the former striker and Birmingham and he is back in England from the United States.
Negotiations are still ongoing but Rooney is widely expected to become the next Birmingham manager.
The club are likely to finalise and announce his appointment as their new manager in the next 24 to 48 hours.
Rooney previously managed in the Championship with Derby County and impressed despite some trying circumstances.
