Palace boss Iain Dowie does not want to sell the player, who he believes could be invaluable to his side's survival fight.
And if Tottenham do get their man, Dowie would not have enough time to bring in a replacement.
Spurs, who face a home FA Cup fifth-round tie with Forest if they get past West Brom in the replay on 12 February, are keen to hold on to Simon Davies, who was today the subject of renewed interest from Everton.
Davies made his first start for two months in the 1-1 draw at West Brom on Saturday.
Everton confirmed they had been in talks over the weekend about signing the 25-year-old midfielder but a Tottenham official said today: "We have rejected any interest in Simon Davies."
Having recovered from a combination of injury and illness, the Wales international gave Martin Jol a glimpse of his ability at The Hawthorns. The Spurs boss said: "It's almost like a new right-winger signing.
"I was happy with Simon because he has not played for a long time. I wasn't reluctant to put him in the starting XI because on Thursday and Friday he looked like the old Simon Davies again."
Davies was unfortunate not to mark his return to the first team with a goal in the FA Cup fourth-round tie but he was unable to direct Jermain Defoe's cross goalbound.
The England striker had earlier equalised for Spurs with a 31st-minute penalty after he was brought down by Darren Purse.
The spot-kick cancelled out Robert Earnshaw's 17th minute strike but some defenders though Defoe had dived.
