The Mail on Sunday says Newcastle will make a sensational offer to Keegan to return as manager after Harry Redknapp turned the job down yesterday.
The club plan to link the former England and Newcastle boss in a dream partnership with Tyneside hero Alan Shearer in a bid to erase the damage done to Ashley's reputation by Redknapp's shock about-turn.
Ashley, Newcastle's billionaire owner, will attempt to appease supporters by turning to Keegan, who became a legend on Tyneside following his time as a player there in the Eighties and as United's most successful post-War manager in a five-year period in the Nineties.
Keegan, 57 next month, has been out of football since quitting as Manchester City manager in March 2005 but, in a recent interview, he refused to rule out a return to management.
Keegan said: "I am 56 but you never say never in anything. If it doesn't happen in the next two or three years I'll be 60 and then it might be too late to return."
Shearer, whose name was chanted by Newcastle fans during last night's crushing 6-0 defeat at Manchester United, has intimated that he would be interested in taking a managerial role at his hometown club if approached, and he would relish the opportunity of working alongside the manager who paid a club record £16million for him when he moved from Blackburn to Tyneside in 1996.
Yesterday a Newcastle source confirmed that the club would prefer to appoint an experienced manager, adding weight to demands for a Keegan-Shearer package.
"Chris Mort [the club's chairman] and Mike Ashley have a good relationship with Alan Shearer," said the source.
"They are well aware of the many qualities he could bring to the club but in the present situation we feel that an experienced manager with a proven track record is required.
"The most important thing is getting the right man. There is no time frame on the appointment. It is vital that Newcastle get it right this time and it will take as long as is necessary to do that."