Houston, whose contract is up in the summer, is set for talks with Blackpool after the Tannadice club granted him permission to speak to the Championship side.
On Monday, Dundee United chairman Stephen Thompson told BBC Scotland that Houston could stay at the club but added: "But only if he accepts my terms."
A statement on United's official website on Tuesday read: "Directors of Dundee United today met with manager Peter Houston and his representative to discuss his contract situation. These discussions were amicable and will continue later this week."
Houston admitted he was surprised United had given Blackpool permission to speak to him because he was still in talking to the club about a new deal.
He told the Daily Record : "It's unexpected. I haven't applied for any jobs. We were still in negotiations over a new deal for me and my staff.
"Mr Thompson and myself's working relationship recently has been fine.
"What he has stated is he has to make cutbacks in staff costs. Before the contact from Blackpool he did say he didn't want to hold me back from bettering myself.
"If he thinks that then I'm grateful to him for allowing me to speak to them.
"Nothing has been decided because Blackpool still have to get in touch with me."
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