The 63-year-old's appointment is dependent on securing a work permit, though Palace hope that the process will not prove overly complicated and that they can announce the appointment in the next week.
The Eagles have been on the hunt for a new manager since it was confirmed that veteran Roy Hodgson would step down at the end of his deal this summer.
Palace had been close to appointing ex-Wolves boss Nuno Espirito Santo until talks broke down at the eleventh hour.
Sean Dyche, Steve Cooper and Frank Lampard were amongst a host of other candidates considered as Hodgson's successor.
Favre left Dortmund in December last year and has a reputation for attacking football, something Palace fans have been calling for during the latter stages of Hodgson's tenure.
Supporters protested the club's lack of ambition and Hodgson's "spineless, defensive tactics" during his final season.
Favre will have a host of players to make a call on in his first few days at Selhurst Park with 11 first team players, including Gary Cahill, Joel Ward and Andros Townsend out of contract at the end of the month.
Christian Benteke has already agreed a new deal, while those still awaiting a decision on their future have been told the new manager will make all the calls.
Once the futures of the players out of contract are dealt with, Palace will focus on revamping an ageing squad and are prepared to invest heavily in the squad this summer.
Wilfried Zaha's future will also be prominent in Favre's in-tray after the Palace talisman again made his desire to leave the club for European football clear to the board. Chairman Steve Parish has said he will not stand in the way of a deal so long as any offer made suits the club.
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