Sky Sports News understands that the Scottish Football Association has reached an agreement in principle with George Burley over a compensation package.
Burley was sacked as Scotland manager on Monday following a disappointing World Cup qualifying campaign and friendly defeat to Wales over the weekend.
He had been under contract with the SFA until 2012 and the decision to terminate his deal means a settlement will need to be reached.
The matter is believed to be almost resolved and confirmation of an agreement can be expected over the next few days.
Attention is now switching to who might replace Burley and a number of names have already been linked with the vacant post.
Thomson backs Smith
Rangers manager and former national team boss Walter Smith has emerged as one of the favourites to take charge and Kevin Thomson does not believe the SFA will find a better candidate.
Gers midfielder Thomson would rather Smith stayed at Ibrox but admits his appointment would provide the country with an important boost.
"I think he is as good as anyone to take the job," said Thompson.
"But I'm not the SFA board, I don't decide who gets the job. It's not my decision to push him in that direction to help the country out.
"But, if they were to pick one of the best managers around, Walter would certainly be in that category.
"He would be a huge loss to Rangers. He is a top manager and I'm sure I speak on behalf of all the punters and players when I say we wouldn't want to lose him.
"But he is at that stage in his career now where, if he fancies it, he might go for it. He might not."