It is reported that the Foxes have made enquiries for Townsend, and that Palace may be willing to sell the England international for the right price. He is also a target for Stoke.
Townsend, who nearly joined Newcastle in January, has not had as big an impact as he first hoped for at Palace, and the club seem happy for him to depart.
The 26 year old has played 36 times for the Eagles, scoring three goals. He featured in the Premier League Cup in Asia during pre-season, but with the Foxes now hunting for his signature and the club happy for him to go, his Palace future could be in jeopardy.