Fowler, 37, has been without a club since February after he left Thai side Muangthong United where he held a similar role.
Since then, proposed moves to English Championship side Blackpool and a new Indian league have fallen through.
"I was told that Fowler is willing to take on the roles of manager, coach and player for T-Team," Terengganu minister Seri Ahmad told the New Straits Times on Thursday.
"We are negotiating with him as we want to assess his fitness level."
Fowler is fourth on the Premier League's all-time top scorers list with 163 after his two stints for Liverpool and spells at Leeds United and Manchester City.
He has also played in the Australian league prior to moving to Thailand in 2011 but goals have proved much harder to come by in the twilight of his career.
Ahmad said he was not being sentimental about the possibility of the club signing Fowler, adored in the region where English football is worshiped and Liverpool garner most support.
"We want to hire him based on his current performance... not past glories," Ahmad said.
"We hope to attract more fans for T-Team by having such a marquee signing. We hope to woo famous players locally as well as internationally.
"We are confident that by having the same individual as the manager and coach, it will help smoothen the running of the club. It will be run more professionally," said Ahmad.
T-Team finished the recently concluded Malaysian Super League season ninth of 14 teams after winning promotion back to the top flight in 2009.
Fowler, who was in Singapore last week to play in the EPL Masters series with mostly retired players, has links with the Southeast Asian country having done media work in Malaysia recently and also played for now-Malaysian owned Championship club Cardiff City.
