Sanchez was closing in a move to the Etihad Stadium on deadline day of last summer's transfer window. However, the move did not materialise in the end with the forward said to have been bitter according to compatriot and City goalkeeper Claudio Bravo.
Staying on with the Gunners with just a year left on his contract, Sanchez is increasingly likely to depart the Emirates Stadium at the end of the season and join City.
However, there was a growing likelihood of manager Arsene Wenger potentially cashing in on the Chilean in the January transfer window, especially with his recent poor form.
According to the Mirror, however, Sanchez will not depart the club next month as City are confident of landing their man on a bosman in the summer window.
With no transfer fee involved, the Citizens will also be able to offer the 28-year-old a huge sign-on bonus as well as a whopping £400,000 ($534,000) a week deal.
The report states that the contract consists of a basic £325,000-a-week ($434,000) deal along with image rights worth another £75,000-a-week ($100,000), which would make Sanchez one of the highest-paid players in world football.
Arsenal are in the same situation with Mesut Ozil, who also has six months left on his deal. However, the north London club are still hopeful they can tempt the German into renewing and have reportedly offered him a £275,000-a-week ($367,000) deal.
Arsenal legend Ian Wright recently slammed his former club for allowing their two best players to run down their contracts.
"It is terrible business for Arsenal, for a club that is accused of being a business to allow two players like that to run their contracts down," Wright said.
"Sanchez on top form is easily a £100m player. Ozil on top form is worth £70m to £80m. Arsenal are letting that go. It is disgusting business on the management side for Arsenal.
"How are you going to sell players like that in January for £25m? It is like people are laughing at you. Manchester City could find £25m in the car seat or something. And you're going to get Sanchez for that kind of money? For it to get to this point where they can be offered that kind of money. And why would you offer £60m when they are free in a few months?"