Despite relegation from the top-tier during 2010/11, The Bristolian has stuck with the club in attempt to secure a second promotion winning campaign.
However, the lure management in London and the chance of a serious tilt towards top-level status is believed to be enough for Holloway to leave Bloomfield Road and as a result the Eagles have made an official approach.
A compensation fee is yet to be agreed, but with both manager and player keen, the Seasiders are likely to want the situation solved as quickly as possible.
Blackpool currently sit eight places and six points behind the Selhurst Park-based club and could challenge for a play-off spot come the end of the season.
Palace co-Chaimen Steve Parish and Stephen Browett reportedly made Holloway their first choice over the weekend after consultations with Chief Executive Phil Alexander.
The club are keen to get their target in place ahead of their clash with Blackburn this weekend, so any deal will need to completed promptly.
Whoever takes charge of the club has been guaranteed that Premier League target Wilfried Zaha will be staying put. The attacker has been long linked with a move away from the club, with a number of potential suitors willing to pay £10m for the player.