Houshmandzadeh had been working out with Palmer in Southern California before the Raiders traded for the quarterback two weeks ago. Houshmandzadeh will work out for Oakland on Tuesday.
Jackson said the decision to look at Houshmandzadeh had been in the works for a while and didn't have to do with adding a receiver who previously had worked with Palmer.
"What I need to do is find out what he is," Jackson said. "I'm going to do everything I can to improve our football team. I mean, he may not be what he once was. He may be what he once was. But I get the opportunity to see him, and see him up close and personal and go from there."
Houshmandzadeh said on Oct. 20 that he was close with Jackson but didn't want to make the coach uncomfortable about a potential reunion with Palmer.
"I don't want to put anybody in that type of position," Houshmandzadeh said on "The Dave Dameshek Football Program" on NFL.com. "But if Hue thinks I can help the team, then I'll be on the team. If not, I won't. I know I can still play."
Houshmandzadeh was at his best with the Bengals and Palmer, catching a career-high 112 passes for 1,143 yards and 12 touchdowns in 2007, his lone Pro Bowl season. After averaging 89 catches, for 1,012 yards and seven touchdowns over a five-year span in Cincinnati, Houshmandzadeh struggled the past two seasons in Seattle and Baltimore.
"He's a born leader," said safety Chinedum Ndukwe, who played with Houshmandzadeh in Cincinnati. "He's a competitor. He gets open. You can't really explain it. He might not be the fastest guy, he might not look like the greatest athlete, but he gets it done. In the slot, I don't think there's any better in the league in the slot."
The Raiders had an open spot on their roster this week and used it on Sheppard. He spent time in training camp with the Raiders and played in the final preseason game before being cut. He hadn't caught on with any other team and was brought back by the Raiders, who have two cornerbacks banged up in Chris Johnson and Chimdi Chekwa.
The Associated Press contributed to this report.