Citizens manager Pep Guardiola is thought to be keen on adding the Chile international to his attacking options this season but has seemingly been shot down by the Gunners following a failed bid this week.
It is, however, believed a deal could still be struck before Thursday’s transfer deadline, with a cash-plus-player deal said to be in the offing, with Raheem Sterling the man to be offered up by City.
Sanchez has less than a year to run on his current deal at the Emirates Stadium, where he reportedly handed in a transfer request on Monday, meaning Arsenal could risk losing him for free next year.
Gunners boss Arsene Wenger, though, is determined to keep hold of the 28-year-old and is still hopeful of agreeing a new deal with the forward.
Sanchez is not the only Arsenal player tipped with an exit this week, with England international Alex Oxlade-Chamberlain also said to be on the verge of a move to either Chelsea or Liverpool.