The Republic of Ireland Under-21 international is understood to have undergone a medical with the Blades after the two clubs reportedly agreed a fee.
United have already signed Lee Williamson from the Hornets and have had a £1.8million bid for Tommy Smith accepted.
Blades manager Kevin Blackwell has confirmed the club are in discussions with O'Toole, Smith and Bristol City's Michael McIndoe.
He told BBC Radio Sheffield: "We are in discussions with all three and I am sure fans will agree they are all quality players.
"We have to build a squad that will give us more options next season."