The report states that City football director Txiki Begiristain has already met with Ilkay Gundogan’s agent last month.
The Premier League giants are also in talks with Wolfsburg midfielder Kevin de Bruyne and Hoffenheim attacking midfielder Roberto Firmino.
The Dortmund star will not extend his contract with the club, which expires in the July 2016.
“Our talks came to the conclusion that he won’t extend his contract and will leave in the summer,” Zorc was quoted as saying by Sky Sports.
Gündoğan has four assists and three goals in 30 appearances for Dortmund this season.
Dortmund sit in 9th place in the League with 40 points from 31 games. The Bundesliga Giants no longer have a chance of participating in the UEFA Champions League next season.