Sancho has struggled to reach peak form since moving from Borussia Dortmund and Ten Hag claimed he was not mentally or physically ready to feature for United earlier this season.
The 22-year-old was sent to do an individual fitness programme in the Netherlands rather than travel to the squad's training camp in Spain during the World Cup last year.
But Sancho resumed group training last Tuesday having returned to Carrington earlier in January and could be involved when second tier Reading visit Old Trafford on Saturday.
"He is training with the team and we will see," Ten Hag told reporters on Friday.
"So, he's improving, he's making steps and we will make the decision after training."
Sancho last played for United in October's 1-1 draw at Chelsea and was left out of England's World Cup squad.
He has failed to justify the hype that saw him hailed as one of Europe's brightest young stars when he moved to United in 2021.
"I said he's on the way back, he's making steps. He's back in team training and now we have to see when he's ready to go back into the games," Ten Hag said.
United have flourished in Sancho's absence, climbing into the Premier League's top four and advancing in both domestic cup competitions.
Chasing the club's first major trophy since 2017, United won 3-0 at Nottingham Forest in the League Cup semi-final first leg on Wednesday.
That result means Ten Hag could rest key players in next week's second leg, but the Dutchman will also be tempted to rotate against a Reading side managed by former United midfielder Paul Ince.
"Football is never decided on paper, we have to be ready for every game, every opponent will be tough and especially in the cup," Ten Hag said.
"That is, for them, a perfect chance. We have to be aware of that. We have to be on the front foot, fully focused and full of energy.
"I think tomorrow we will have a strong selection for this game."
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