The Dutchman, 49, is favourite for the vacant full-time role at the English Premier League club, with Aitor Karanka to be announced as Middlesbrough manager on Wednesday.
Meulensteen, formerly head coach of Brondby and Anzhi Makhachkala, had three spells at Old Trafford as a youth, reserves and first-team coach.
He had been expected to head to the Qatar Football Association as a technical director but his agent Fons Van den Brande said Meulensteen was negotiating elsewhere.
"There is a lot going on, that's all I can say, but I can confirm that he definitely will not be going to Qatar," Van den Brande told The Independent.
"I have orders to say nothing else. There are a lot of negotiations going on at this moment so we will have to see what happens in the next few days."
Keith Millen is in charge at struggling Palace, who are bottom of the Premier League, as caretaker, after Ian Holloway resigned in October.
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