The 22-year-old winger scored his third goal for the Saddlers on Tuesday in the 3-2 win over Chelsea Under-21s in the EFL Trophy.
He’s put in several impressive performances this season, but is yet to sign a new deal with the club.
Having joined in the summer on a short-term deal, he’s expected to be made a free agent in January if Walsall don’t tie him down to a contract.
Recent reports have suggested that clubs are interested in the forward’s signature if he leaves the Black Country, but Dutton insists the club would ‘love’ to keep him.
“We’re in dialogue with Wes at the moment,” he said.
“Obviously he loves playing here, he loves playing for the club and we’d love to keep him.
“It’s positive dialogue at the moment but without anything substantial there.”
McDonald has found it tough to hold a permanent place in Walsall’s starting XI this season, with formation changes often leaving him sidelined.
Fans have taken a shine to the Birmingham academy product since his arrival at the club, as his fast feet and acute finishing has excited those on the Saddlers’ terraces.
And Dutton has challenged the winger to keep his performances consistent as he looks to fire Walsall away from he bottom of League Two.
“That’s Wes McDonald in a nutshell, he’ll frustrate the manager in the first half performance when he’s not keeping possession and he’s giving it away cheaply,” he said.
“But the flip side of it is, the one time that he brings the quality to the table, he’ll kill teams.
“He’s showed how good he can be and the potential there.
“He’s obviously a great player and he’s brimming with confidence.
“The fans love him, we love him, and hopefully he can kick on.”