The Seasiders are seeking a replacement for Michael Appleton, who quit last week for a move to Blackburn.
A Dundee United spokesperson confirmed: "The club have granted Blackpool permission to contact Peter Houston.
That's on the basis that, as a football club, we won't stand in the way of anyone furthering their career."
Appleton's departure saw his short spell at Blackpool come to an end, having replaced Ian Holloway at the helm in November.
Former Nottingham Forest boss Sean O'Driscoll was linked with the post, before being confirmed as Bristol City's new manager today.
Houston is now in contention for a switch to the npower Championship after United paved the way for talks to take place.
The former Scotland assistant coach, 54, has been manager at Tannadice since December 2009, when he initially took over the reins from Craig Levein on a caretaker basis.
Success in the Scottish Cup and a third-place finish in the Clydesdale Bank Premier League saw Houston installed as United boss on a permanent basis six months later.