Saunders quickly emerged as the favourite for the job following Wolves' decision to sack Stale Solbakken on Saturday night in the wake of their FA Cup third-round exit to non-league Luton.
In a statement on Sunday, Doncaster said they hoped to retain Saunders but would not stand in the way of the former Wales international.
"Doncaster Rovers can confirm that they received an official approach from Wolves this morning to speak to Dean Saunders regarding their vacant position," the statement said.
"The Rovers board will not stand in the way of Dean but will try to keep him at Rovers. Dean has been given permission to speak to Wolves and he is meeting them today.
"The board have a strategy for a situation such as this and have a `Plan B' in place. We will keep everyone updated as we find out more."
The 48-year-old Saunders was in charge of Doncaster when they were relegated to League One last season, but they are firmly in the frame for a swift return to the Championship and moved level with leaders Tranmere by beating Colchester 1-0 on Saturday.
If he completes a switch to Molineux Saunders will inherit a side tipped for promotion back in August, who instead only six points above the drop zone following a dismal six months under Solbakken.
Although the 1-0 FA Cup loss to Luton proved the final straw for the Norwegian, sacked along with Johan Lange and first-team coach Patrick Weiser, Wolves' problems ran far deeper.
Just three wins in their last 16 league games have left them 18th in the table, a run described as "hugely disappointing" in the club statement announcing Solbakken's departure.