Leeds United have made three separate proposals for the Northern Ireland international, all featuring add-ons, but have so far failed to meet Southampton's demand of £25million plus add-ons. With no agreement in sight, Fulham are ready to make their move for the 22-year-old, who began his career at Manchester City.
Fulham manager Alvaro Arbeloa is understood to be fully on board with the move, and talks between the two Premier League and Championship clubs are expected to advance in the coming days.
Charles enjoyed a standout campaign for Southampton last season, scoring what looked to be the winning goal against Middlesbrough in a match that appeared to have sealed the Saints' place in the play-off final, only for the result to be overturned following the Spygate controversy that ended their season abruptly.
He was left out of Southampton's squad for a friendly against Eastleigh at the weekend, having been given extra time off after representing Northern Ireland in international friendlies.
Fulham's transfer activity extends well beyond Charles. The club are also showing interest in Arsenal winger Reiss Nelson, who endured a disappointing loan spell at Brentford last season and is now searching for greater game time, with Benfica and Valencia also credited with interest in the 26-year-old.
Elsewhere in wide areas, Fulham are exploring a number of ambitious options, including Real Madrid's Franco Mastantuono, while the club have also held talks with Trabzonspor over Nigeria centre-back Chibuike Nwaiwu as they continue to reshape their squad across multiple positions this summer.
The scale of Fulham's activity underlines the breadth of Arbeloa's rebuilding plans as he looks to add depth and competition throughout the squad before the transfer window closes. Southampton's resistance over Charles reflects their determination to extract full value for one of their most important players following relegation from the Premier League, but with two Premier League and Championship suitors now circling, the Saints may eventually find themselves with little choice but to accept an offer close to their asking price rather than risk losing the midfielder for a reduced fee later in the window.