Progress was being made on confirming a visit, after emailing him for four years, group chairman the Rev Greg Hughson said yesterday.
While in Britain on study leave recently, Mr Hughson met Islam's public relations manager and delivered a formal invitation signed by Dunedin Mayor Peter Chin.
"The response was he was keen to come, providing he could fit it into his busy schedule."
A decision was expected by November.
"We are hoping he can come. It would be great for Dunedin and for New Zealand," Mr Hughson said.
The interfaith group was formed after the 2001 terrorist attacks in the United States, with the aim of promoting respect and understanding between followers of Christianity, Judaism and Islam.
Peace lectures have been held annually since 2004 and have featured speakers including former New Zealand prime minister the late David Lange and Australian Muslim academic Prof Abdullah Saeed.
The 2008 lecture will be given next month by Christchurch anti-nuclear activist Dr Kate Dewes, who in January was appointed New Zealand's only representative to the United Nations Advisory Board on Disarmament.
Singer-songwriter Cat Stevens, whose hits included Peace Train, converted to Islam in 1977, to devote himself to educational and philanthropic causes.
He runs a charity called Small Kindness, which provides shelter, food and other necessities for people in war-torn countries, as well as educational opportunities for girls and women.
He began to perform again in the 1990s, appearing at various fund-raising events and donating a percentage of album sales to his charity.
