The former Northern Ireland international was reported to have been offered £30,000 a week to replace Marcos Paqueta, who left last week to join Qatar outfit Al Gharafa.
Al Shabab vice-president Mohammad Al Merri told Gulf News that Lennon is one of five names they are currently looking at.
“We have not yet finalised on our direction but he is one of the names presented to us,” he said.
“There are five coaches in the running but we still haven’t negotiated.
“The other candidates are mainly South American. We can’t name the other candidates but we expect to confirm the new coach by the end of next week.”
Lennon quit Celtic three weeks ago and is keen to make a swift return to the game.
“I don’t want to be out of the game too long. And beggars can’t be choosers. It’s not about looking or waiting for a particular club,” he told reporters earlier in the week.
“I had seven years as a player at Celtic and six as a coach and manager, and it’s been a huge part of my life. But I’d given it plenty of time to think about leaving and now I’m looking forward to the new challenges.”