The Championship club are seeking a new manager after the dismissal of Gary Rowett last week. Victory on Boxing Day lifted Oxford out of the bottom three.
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The Sun says Terry is in contention for the job, though faces stiff competition from former Rangers and QPR manager Michael Beale.
Terry had declared he was giving up on a managerial career earlier this season after receiving little encouragement when applying for jobs in recent years.
The former England captain has been working inside Chelsea's academy and is also a former Aston Villa assistant manager.