That is according to The Mirror, who claims that Terry will choose the Villains once his contract with Chelsea expires on July 1.
The report suggests that Terry wants to play in the Championship because he does not want to face Chelsea in the Premier League next season.
Another factor influencing Terry's decision is his relationship with Villa manager Steve Bruce.
The pair were recently photographed twice playing golf in Portugal.
Birmingham boss Harry Redknapp confirmed his club had made an offer a few weeks ago, but it seems Terry has decided to join the Blues' rivals instead.