Blues boss Phil Brown says talks have “progressed” as he tries to bring the 25-year-old back to Roots Hall, where he finished last season on loan.
McLaughlin would likely be just a fringe player for Forest should he remain on the banks of the River Trent for the forthcoming Championship campaign, and the Reds are thought to be open to the idea to allow him to move on.
“Things have progressed where Stephen McLaughlin is concerned and we’re now in talks about trying to sign him,” Brown told the Nottingham Post.
“The chairman (Ron Martin) obviously knows their manager Dougie Freedman very well from his time playing here during his own career and hopefully that can help us get it sorted out because I would love to have Stephen with us again.
“He has a fantastic left foot and I think he would be able to do well in League One.”
McLaughlin scored twice in nine appearances for Southend last season as they secured promotion to League One. He also spent time on loan at Forest’s city rivals Notts County.
The Irishman joined Forest in January 2013 but has found first-team chances limited, making just nine appearances for the Reds during the 2014/15 campaign.