It is understood the deal will include an option for the Championship outfit to make the transfer permanent, which would turn into an obligation to buy if Leeds were to gain promotion.

It would represent a coup for Leeds and their manager Marcelo Bielsa.

Costa, 25, joined Wolves from Benfica, initially on loan, in 2016, before making the move permanent for a then club record £13m in January 2017.

He made 34 appearances on Wolves' return to the Premier League last season.

Leeds confirmed the loan arrivals of Jack Harrison from Manchester City and Ben White from Brighton on Monday, along with the signing of Liam McCarron on a three-year deal from Carlisle United.

It is anticipated Jack Clarke will complete his £10m move to Tottenham this week, but then be loaned straight back to the Elland Road outfit.