Dowie, who was sacked by City Chairman Ray Ranson due to a clash of personalities, along with Shearer had been close to walking out of Newcastle last week after being told that there would be no new money for players.
However, current Magpies owner Mike Ashley appears to have found £20m on the proviso that high earners and under-achievers are off-loaded.
"Bringing Alan Shearer back to Newcastle United was the best decision I have made," said Ashley to BBC Sport.
"Alan and his staff did all they could to try and keep us up in the short space of time they had. "Talks are now ongoing between us about how we can take this club forward again."