The former England captain favours a move to Villa Park to work with Steve Bruce despite Premier League interest, Sky Sports News HQ understands, and a deal could be completed in the next week.
Terry's contract at Stamford Bridge expires in three days' time, though the departing Blues skipper has uploaded social media posts showing himself in pre-season at the club's Cobham training ground.
Birmingham manager Harry Redknapp had confirmed an offer to Terry had been made and admitted he had been trying to persuade the player into a move to St Andrew's when the pair took part in Michael Carrick's testimonial earlier in June.
Redknapp told Talksport: "I had a chat with him [Terry] and said to him come in - he's doing his coaching badges - have a year or two and who knows what he wants to do in the future?"
Terry has since posted pictures playing golf with Bruce, as well as workout videos with the Villa boss' son, Alex.