Pellegrini has already confirmed he is leaving Malaga at the end of the season, whilst City have fired Roberto Mancini.
“I have a verbal agreement with them and hopefully that can become official,” he told Al Primer Toque.
“I have always liked challenges and I am very excited by this project. The idea is to build a project at all levels. The chance to construct an infrastructure is as important to me as simply turning up at a team that has a chance of winning things. For me, the objective is not just titles.”
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Since Guus Hiddink arrived at the helm, Chelsea have improved considerably after a tricky start to the campaign.
Newcastle United are staring down the barrel of relegation to the Championship for the second time in the past eight years.