Castle boss Bobby Robson has had his eye on the England U21 ace since Rovers' promotion to the Premiership last season. He is apparently hoping to sign the youngster before the end of the transfer window next month.
Robson twice tried to sign Dunn last season but was thwarted by Rovers boss Graeme Souness.
Sir Bobby sees Dunn as a perfect replacement for Rob Lee in the middle of Newcastle's midfield.
We'll bring you the latest on this story as news breaks.