The Brazilian midfielder headed home in 2011 on an initial season-long loan, which has since been extended.
The 25-year-old has expressed a desire to remain in his homeland, and Sao Paulo are keen to keep him.
Denilson will, however, be due back in England this summer if no move is put in place.
Sao Paulo are confident a deal can be done, but have revealed that they will leave it as long as possible before entering into transfer negotiations.
Vice-president Joao Paulo de Jesus Lopes told ESPN Brasil: "There are still more than 60 days left on his contract, so there are a couple of points to take into consideration.
"The first point is that we are interested in the player and the second point is that we must deal with this situation closer to the end of the deal.
"If we do it too early, it will end up costing us more money."