Sportsmail has learned Warnock is being seriously considered by Wednesday chairman Lee Strafford, a move that will lead to fierce debate in the Steel City.
Hate figure: Ex-Blades boss Warnock is in the frame
Appointing Sheffield-born Blades fan Warnock would be a hugely controversial move given his status as a hate figure among the majority of their fans.
But Warnock's years of managerial experience, his knowledge of the Championship and ability to operate on a tight budget are viewed as major plus points by the powerbrokers at Hillsborough.
In addition, not only did he guide Sheffield United to the Premier League in 2006, Warnock has also overseen promotions for Scarborough, Notts County, Huddersfield and Plymouth.
Despite the obvious stumbling blocks, Warnock could be tempted by a move away from Palace because of the serious financial problems which have seen him and his players not paid on time for the second month in a row.
All concerned are expected to receive December's money this week, while the players will meet their union officials to discuss the situation once the money is in their accounts.
Chairman Simon Jordan has just done a deal with major creditor investment company Agilo over £4.5million owed to stave off administration, but now has to settle a £1.2m tax demand with a court hearing due for January 27.
The likelihood remains that players, including star striker Victor Moses, will have to be sold to balance the books.
Despite their problems, Palace are only three points outside a play-off place, while Wednesday are in the bottom three. Wednesday are also struggling financially, with the club reportedly £26m in debt, but the chance to revive former glories at Hillsborough is a proposition that has attracted widespread interest, even though Alan Shearer ruled himself out of the running.
Vacant: Sheffield Wednesday have a long list of candidates for the manager's job
Former Wednesday manager Paul Sturrock has been linked with a return, while Darren Ferguson, Gary Megson, Nigel Worthington and Steve Cotterill have also beenmentioned as contenders. Youth team coach Sean McAuley was made caretaker after Brian Laws left the club on December 13 following a 3-0 defeat to Leicester.
Coincidentally, Warnock led Palace to a 2-1 victory over McAuley's Wednesday side in the third round of the FA Cup at Hillsborough on Saturday.
Curiously, Warnock, who described himself in his autobiography as a Wednesday hater, talked the club up after his Palace team knocked them out of the Cup.
He said: 'If I'd got money, this would be the club I'd buy, and I mean that. It is a club that can get 30,000 crowds. It's a fantastic club. They just have to get out of their current difficult situation.
'Everybody at Wednesday has got to be as positive as they can. There are a lot of plusses going for this club if they can turn the corner in the next few weeks and get going again.'
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