The former Wallabies coach and current Sydney Roosters NRL assistant did not apply when expressions of interest were called by Rugby Australia, who oversee the high performance operations of the club.
Cheika said his priority was to see out the season with the ladder-leading Tricolours, while he is locked in as coach of Lebanon for this year's Rugby League World Cup.
But it's understood RA have since sought out Cheika and a deal could be finalised as early as this week.
The move follows the return of veterans Bernard Foley and Nick Phipps to the club from overseas, the pair starting in the halves under Cheika when the Waratahs won their only title 12 years ago.
Since his departure from the Waratahs in 2015, the serial under-achievers have only played one semi-final, finishing eighth with a 5-9 record this year and struggling to build continuity in their roster.
Cheika, who piloted the Wallabies to the 2015 World Cup final, was the first man to win major club titles in the northern (Leinster in 2009) and southern  hemispheres and won World Rugby's 2015 coach-of-the-year award.
His return would add gravitas to the code ahead of next year's Rugby World Cup in Australia, with a healthy Waratahs crucial to the sport's pulse in the country.
"We want world-class coaches, right across the system," Rugby Australia boss Phil Waugh told AAP when asked if Cheika was in the mix last month.
"That's our focus; there's multiple applicants and we're working through it.
"We want to provide certainty to players and supporters as quickly as we can.
"I don't like to anchor myself to timelines when it comes to coaching announcements, but we're conscious of getting the right person and the importance of a successful Waratahs in a World Cup year."
Stephen Hoiles, Chris Latham, former Wallabies both coaching in the US, and ex-Australian sevens coach John Manenti were also reportedly in the mix for the job.
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