The German outlet states that City have reached a €30 million agreement with Borussia Dortmund for the midfield playmaker and that personal terms have been agreed with Gundogan.
City are set to make an announcement regarding the transfer at the end of the season.
The 25-year-old midfielder was closely linked with a move to the Premier League last summer but the move stalled due to his unrealistic wage demands from his agent.
Gundogan currently has one-year remanning on his contract with Dortmund which expires in June but he is reported to have refused to sign a new deal in order to push through a summer transfer.
Premier League rivals Arsenal and Italian champions Juventus are also reported to be in the race for Dortmund midfielder.