The Brazilian centre-back has requested to leave the La Liga side amid strong interest from The Magpies, who are desperate for defensive reinforcements before the end of the month.
Newcastle sit 19th in the Premier League and have the second worst defensive record in the Premier League while Sevilla are second in the Spanish top flight with the best defensive record in the division.
Carlos has been a regular in a side who have conceded just 13 times in 20 league matches this season.
And Lennon, who watched Newcastle’s 1-1 draw against Watford on Saturday, believes further signings are needed on Tyneside as they battle to avoid relegation.
“I was at St James's Park at the weekend and [Kieran] Trippier was very good,” Lennon said on Sky Sports News. “Chris Wood is obviously still finding his feet as a new signing in there.
"But the real problems are in the middle of the team and centre-half is an area where they want to improve on. Diego Carlos has made it clear he wants to leave Sevilla so you imagine he's looking at the aspirations of what Newcastle have to offer.
“But to leave a team second in La Liga to go to Newcastle is a huge step but obviously he's bearing the ambitions of the club up.
"It's not a quick fix for Newcastle, they've got a lot of work to do.”