The Preston North End squad learned of Simon Grayson's impending departure when they returned for pre-season training at Springfields on Thursday morning.
Grayson was preparing to take the first session of the summer when Sunderland made official contact with North End about the Deepdale boss.
With the Black Cats prepared to pay the compensation figure stipulated in Grayson's contract, they were given permission to hold talks with him.
North End officials later addressed the players and the backroom staff before training to inform them of the situation.
It is understood that Grayson could be unveiled as Sunderland manager by Thursday evening.
First-team coach Steve Thompson will take charge of pre-season training for the time being.
It is believed that assistant manager Glynn Snodin will follow Grayson to the Stadium of Light.
Grayson had been strongly in the running for the Sunderland job throughout the summer, it being more than five weeks since David Moyes resigned as the Wearsiders' manager after relegation from the Premier League.
He was high in the bookies' odds for much of that time and was installed as favourite after Aberdeen manager Derek McInnes turned the job down.
After McInnes chose to stay in Scotland, Sunderland put their managerial search on hold while the ownership of the club was sorted out.
Sunderland were in talks with a German consortium about a takeover, one which would have seen a German manager installed if it had happened.
But shortly after North End brought the approach for Grayson into the public domain, Sunderland released a statement saying takeover talks had ended.
The statement read: "Recently, we informed supporters that discussions were taking place with parties who had expressed an interest in acquiring ownership of Sunderland AFC.
"Subsequently, more detailed talks were held over the last week with one of these groups.
"Ellis Short and the board were committed to ascertain if this group was better placed to take the club forward in the right way and to improve it, both on and off the pitch.
"A defined timeframe was placed on discussions to ensure that the club could move forward quickly and decisively with its plans for the new season should they not come to fruition.
"We have concluded these talks and have determined that this proposed sale would not be in the best interests of Sunderland AFC.
"Ellis Short will continue his commitment to the club, both financially and personally, moving forward.
"We would like to thank our supporters for their patience during what we know has been a period of uncertainty and frustration for them.
"Preston North End have granted us permission to speak with Simon Grayson regarding the manager’s position."