The 24-year-old joined Newcastle in January for around £10million from Tottenham and has yet to settle on Tyneside.
If Rafa Benitez's side are relegated, Townsend is likely to be among a clutch of players who will move on as he will not want to feature in the Championship and offers in the region of the £10million the Magpies spent on him are likely to be accepted.
The Eagles were in the running to sign the England international in January and boss Alan Pardew will make a move for him if Newcastle are consigned to the drop in the next few weeks.
However, Townsend is likely to be wanted by several other top-flight sides so Pardew may face some stiff competition to land him.