The youngster has signed a new deal at Wolves which keeps him at the club until 2022 but with it appearing unlikely that he will break into the first-team reckoning at Molineux he could be sent out on loan by Nuno Espirito Santo.
Otasowie has previously been linked with Coventry City, Luton Town and Peterborough United but Blues have now seemingly entered the race to sign him.
Birmingham will be looking to add fresh faces to their squad following their frustrating second half of the campaign which led to them being precariously close to the relegation zone.
However, with finances having taken a hit even further due to the Coronavirus pandemic, they will be looking to add players with little cost and Otasowie might just fit the bill.
Blues only won four league matches since the turn of the New Year and with Pep Clotet having left the managerial post, they are reportedly close to appointing Aitor Karanka as his successor.
Birmingham City will need to act quickly if they are looking to seriously pursue the 19-year-old with a number of clubs interested in taking him on loan for next season.
Otasowie will be eager to enhance his development and progress in senior football and taking the step down to the Championship could be the ideal stage in which to showcase his footballing ability.
Blues will be keen to solve their managerial problems as soon as possible in order to focus solely on the transfer market and bring in additional faces to avoid another disappointing campaign in 2020/21.