The 25-year-old midfield playmaker is set to become Pep Guardiola’s first signing as Man City manager. The transfer fee is believed to be in the region of £20 million.
Gundogan will miss Euro 2016 after dislocating his knee during training earlier this month. The German tabloid Bild report that it will take Gundogan four to six months for him to make a full recovery.
However, the Citizens are keen to complete a deal and an official confirmation is expected by the end of the week.
The Germany international was also sidelined for the 2014 World Cup with a back problem that ruled him out for almost the entire 2013-14 season.
Gundogan has seven assists and three goals in 40 appearances for Dortmund this season.