Colback still has a year left on his current contract at St James' Park, but according to Newcastle United's official website the move could be made permanent if both clubs agree.
The 28-year-old spent the second half of the 2017/18 season on loan to Forest, where he proved popular with the fans and coaching staff.
Forest manager Aitor Karanka had said he was still looking for a solution in midfield and the purchase of Colback could be the answer to his conundrum, with the star surplus to requirements with the Magpies.
Forest have signed three players already this season, Michael Dawson, Lewis Grabban and Jack Robinson. They have released three players including David Vaughan to Notts County on a free.
The Magpies star was part of Newcastle's Championship winning success in 2016/17 season. Last season Colback played 16 times and scored once for Nottingham Forest.
He scored five times in 102 minutes for Newcastle after arriving at the club from Sunderland in 2014. He will now link up with former Newcastle team-mate Daryl Murphy.