The midlands club have altered their stance after initially stating Premier League experience was a vital ingredient for any possible successor to Mick McCarthy.
Former Sunderland, Wigan and Birmingham boss Steve Bruce remains a contender after holding initial talks with Wolves owner Steve Morgan and chief executive Jez Moxey on Friday. But McDermott is now at the forefront of Wolves' plans although they have denied speculation claiming they have already held talks with the former Arsenal player.
McDermott replaced Brendan Rodgers as Reading caretaker manager in December 2009 and earned the job on a full-time basis the following month after his side achieved a shock FA Cup win over Liverpool.
He led the Royals to the play-off final last season and has mounted another strong promotion challenge this season despite the loss of striker Shane Long and defender Matt Mills in the summer.
McDermott is also likely to have the support in the Wolves dressing room of striker Kevin Doyle and midfielder Stephen Hunt who worked with him at Reading before moving to Molineux.
Wolves chief executive Jez Moxey has maintained a stance of not commenting on specific names on the radar of himself and Morgan.
But it is understood Wolves have distanced themselves from reports linking them with Brighton boss Guy Poyet.
Bruce impressed when meeting Morgan and Moxey but there has been a negative reaction to his possible appointment from some sections of fans.
Source: PA
Source: PA