Other Raiders head coaching candidates, including Philadelphia Eagles offensive coordinator Marty Mornhinweg and Chicago Bears offensive coordinator Mike Tice, already have been informed that Oakland has found its man and they are no longer under consideration, according to sources.
Allen is meeting Tuesday with Raiders officials to see whether the two sides can take the final steps they need to come to an agreement.
Raiders general manager Reggie McKenzie is currently at the Senior Bowl in Mobile, Ala., and is expected to make his decision this week. McKenzie said in an email that he has not begun negotiating with any candidates.
"He's got a lot of stuff he needs to answer," McKenzie told CSNCalifornia.com. "Nah, it's not a lock, irregardless of other people's reports."
What would be notable about this hiring is that Allen would become the first Raiders head coach with a defensive background since late owner Al Davis hired John Madden. Madden was the Raiders' linebackers coach when Oakland promoted him to head coach in 1969.
Allen also would come from the division-rival Broncos. The last time the Raiders hired a former Broncos assistant as head coach was Mike Shanahan in 1988.
Davis exclusively hired offensive coaches after Madden, including Hue Jackson, who was fired after going 8-8 in his only season on the job.
But there have been plenty of changes for the Raiders since Davis died Oct. 8. His son, Mark, took over the team and hired McKenzie as general manager after the season to take over many of the on-field and personnel decisions that Davis had made during his nearly half-century with the organization.
McKenzie immediately fired Jackson after signing his contract Jan. 10 and began a search for the new head coach. He interviewed Allen, Mornhinweg, former Miami interim coach Todd Bowles, Saints offensive coordinator Pete Carmichael Jr. and Green Bay assistants Winston Moss and Dom Capers.
With McKenzie having spent almost two decades with the Packers, his former colleagues in Green Bay were originally considered to be the favorites.
But now it appears as though Allen could be the choice. In his first season as coordinator in Denver, he helped the Broncos improve from allowing a league-worst 29.4 points and 390.8 yards per game to ranking 20th in yards (357.8) and 24th in points (24.4) this season on the way to an AFC West title.
The Broncos increased their sack total from 23 to 41 as they were tied for the sixth-most blitzes on pass plays in the league this season, according to STATS LLC.
Allen had served as New Orleans' secondary coach the previous five seasons and had also coached for Atlanta. He runs a 4-3 defense, which the Raiders have used the past seven seasons.
Adam Schefter is ESPN's NFL Insider. Chris Mortensen is ESPN's senior NFL analyst. Information from The Associated Press was used in this report.