The 25-year-old dislocated his knee cap during training ruling him out for the rest of the season and out of Euro 2016 this summer.
Gundogan looked set to be Pep Guardiola’s first signing era after Man City sporting director Txiki Begiristain met with Gundogan’s uncle and agent in Amsterdam back in March.
According to the Manchester Evening News, the transfer was close to completion with City agreeing personal terms with Gundogan.
The report goes onto state that it is unclear whether the injury will affect the Citizen’s plan to sign him over the summer.
Gundogan’s fitness has been under the spotlight after the 25-year-old missed a year of football due to a back injury.
The latest injury comes off the back of another injury Gundogan picked up in March which kept him out for a month.