Cavendish has won on the Champs-Elysées four times in his career, but will have to forego attempting for a fifth this summer if he's selected in the British squad for the Games.
His place in the squad is by no means guaranteed, having finished out of the medals in the Omnium on Saturday, but a gold medal in the Madison with Sir Bradley Wiggins on Sunday will boost his chances.
"For sure, he will be at the Tour - 100 per cent. [But] Cav won't do three weeks of the Tour. If he wants to medal, he's well aware that he probably wouldn't be going to Paris," said Sutton, British Cycling's technical director.
"That will be a discussion between Cav, Dougie [Ryder, Dimension Data team principal] and Brian [Smith, Dimension Data team manager].
"I'm very close to Brian Smith and Dougie and they're very supportive of the venture. It's just a matter of sitting down with Cav and, 'Are we going to do this? Do you want to put yourself forward?', and then the selection panel will come together."
Cavendish has set himself the goal of wearing the yellow jersey at the Tour this summer, with a sprint stage to open the race meaning that is a realistic possibility.
Sutton said he will sit down with Cavendish and the coaches to break down his performances at the World Championships and discuss the Rio plans, but is so far not ruling out the Manxman being part of the squad.
Whoever is selected to ride the Omnium in August will have to take the role of the fifth man in the team pursuit, something that Sutton believes wouldn't be a problem for Cavendish.
"I have total confidence that Cav can do the job in TP. I have always believed that. I don't think that comes into question for me," he continued.
"A lot of people say, 'Are you diluting your TP medal opportunity?' I don't believe that at all. I believe Cav is, from years and years ago, a very good little TPer and, when he's on form, I'm sure he can pull his weight. I haven't got any problems in that area at all."
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