There are only a few minor details left to iron out before the 22-year-old will be given the green light to finalise a move to the City Ground.
A fee has already been agreed and personal terms have been negotiated.
Forest boss Sean O'Driscoll is looking forward to getting McLaughlin on board and unleashing his potential - with it hoped he will make a similar impact to that of former forward Garath McCleary.
"We are in the process of signing Stephen and he looks to be a talented boy," O'Driscoll said in the Nottingham Evening Post.
"He can play on the right or the left, he is 22 years old and has great potential.
"He came from the same club as James McClean came from, when he went to Sunderland. They let him go because they knew they had Stephen coming through as well."
McLaughlin will initially link up with Forest's development squad, but he is expected to be knocking on the first team door before too long.
O'Driscoll added: "I don't think you can wait a couple of years for him to come through. He has impressed in training.
"The dilemma is whether you throw him in because he has that potential? Because how long was Garath McCleary here before Steve Cotterill gave him a run of games in the side?
"He was here for a few years when what he needed was games. We want to be in a position where we can give him a chance."