The 27-year-old is Flitcroft's primary target and they are in talks with Sheffield Wednesday to bring back a striker who scored six times in 13 appearances during a loan spell last season.
Flitcroft told the Barnsley Chronicle: "We've moved a step closer with Chris O'Grady this week. It's been a case of one step forward and one step back.
"Chris has made no secret of his desire to play for Barnsley and we're now just in the final procedure of tying up a deal for both clubs.
"It's a step closer but it's still not done and I won't be happy until his name is on the dotted line."