The Premier League broadcaster SkySports have reported that the City Blues are in advanced talks with Gundogan but are yet to strike a deal with Dortmund.
City are understood to be £8 million short of Dortmund’s asking price of £36 million.
The Reds manager Jurgen Klopp does of course know Gundogan well from his time in charge of Dortmund in fact he is credited with his development.
Gundogan is likely to feature against Liverpool in the Europa League quarter-final second leg at Anfield.
The 25-year-old missed the Round of 32 tie against Tottenham and the first-leg of the Liverpool clash. Gundogan was expected to also miss the return game but he has recovered in time.