Pearce, who also works with the senior side when his job with the youngsters permits, is out of contract in the summer after just over two years in the job, but will be asked to stay beyond his current deal.
Capello has been so impressed by Pearce's work with the junior team, who are preparing for the Under 21 European Championship in Sweden, that he wants him to commit long-term.
Impressed: Capello has urged the FA to boost Pearce's pay packet
England's head coach had been waiting for Ian Watmore to start work at Soho Square as the FA's new chief executive. Now he is in place, talks will begin with Pearce.
Capello increasingly sees Pearce as a future England manager and the former Manchester City coach has responded well to the Italian's methods since his appointment in December 2007.
Pearce guided England to the semi-finals of the European Under 21 Championship in 2007 before his side were eliminated by host country Holland 13-12 in a dramatic shootout.
Chelsea's Cole and Manchester United star Ferdinand sit out England trainingMartin Samuel: Find a way to rein in Spain and win World Cup, Fabio United boys must bounce back like John Terry, says England boss Capello
England's junior coaches are coming under increasing FA pressure to win a tournament and Pearce has a tough test in Sweden, where his team face a Spain side more highly rated than the group which once boasted Xavi Hernandez and Andres Iniesta, the Barcelona midfield masters.
Pearce will be offered a new three-year deal worth around £1.5million to take him through to Euro 2012 in Poland and Ukraine, with the possibility he could succeed Capello if the head coach quits after that tournament.
Capello was concentrating on England's immediate future yesterday by working with his squad for the upcoming World Cup qualifiers in Kazakhstan on Saturday and then the gimme against Andorra at Wembley a week tomorrow.
Keeping relaxed: Rob Green, Scott Carson and Paul Robinson train yesterday as they await Fabio Capello's decision on who will be his No 1 against Kazakhstan
Although Ashley Cole and Rio Ferdinand missed the session with niggling injuries, they are expected to be fit to fly with the team to Kazakhstan tomorrow.
England have already suffered seven withdrawals for the Group Six qualifiers, but that will give others the chance to impress. Peter Crouch has retained his place after scoring the opening goal against Ukraine in April, but admits that another long season has taken its toll on the players.
High profile: Crouch challenges Sunderland's Anton Ferdinand
The Portsmouth striker said: 'We have to keep our heads together to make sure we end the right way. If we get six points, we're almost at the World Cup. We will need three more to be certain, but we have to be up for these games.'
Crouch has thrust himself back into contention for an England starting place after a decent season with Portsmouth, scoring 11 goals in the Barclays Premier League following a £9m move from Liverpool last summer.
Crouch added: 'I think Fabio Capello would prefer it if I was at a high-profile club and playing every week, but to be fair that wasn't going to happen. I had a very difficult decision last summer, but Capello told me I needed to be playing every week and I am now.
'At Liverpool we were playing more high-profile games in the Champions League, but I would have only played half the games. I made the right choice going to Portsmouth because I played in every Premier League game this year and enjoyed it. We did not do as well as I thought we would, but we've lost a lot of players.
'Whenever I've been called upon by England, I've always thought I've done well. I played against Ukraine because of injuries, but I got a game, scored the first goal and I think I did OK. Hopefully I've put myself in the frame to play against Kazakhstan.' Chelsea's Cole and Manchester United star Ferdinand sit out England trainingMartin Samuel: Find a way to rein in Spain and win World Cup, Fabio United boys must bounce back like John Terry, says England boss Capello