According to ESPN, the 17-year-old attacker is one of the brightest prospects in English football. He is in his final year of his scholarship deal at the Etihad and the Citizens want to tie him down by giving him a professional contract.
The attacker was signed by City from Watford for £500,000 ($651,300) in 2015. He is yet to commit his future to City as he has concerns over his chances of making his way into Pep Guardiola's first team.
Sancho is aware that it is a tough task for him to break into the senior team as the Catalan manager already has the services of high-profile names at his disposal for the attacking positions. This has alerted clubs in England and Europe.
Arsenal and Tottenham have maintained their interest in signing the winger. The two north London rivals will face competition from Germany as Dortmund are also looking at the option of signing Sancho.
The Bundesliga club have a track record of developing young players and promoting them to their first team in the past few years. A move to Signal Iduna Park will help Sancho break his way into the first team faster than the other two Premier League clubs. Dortmund remain hopeful of using this to lure Sancho to Germany.
Should Sancho decide to leave City this summer, it will be a massive blow to the Manchester club. Their chairman Khaldoon al-Mubarak had earlier backed Sancho, Phil Foden and Brahim Diaz to make their way into Guardiola's first team.
"What makes it special this year especially is that we have three or four players that we can genuinely believe have a very good chance of making it to the first team," Al-Mubarak told City's official website, as quoted by the Telegraph.
"You look at Sancho, you look at Phil Foden, you look at Brahim Diaz , just to name a few, these are players that are extremely talented. These are players who have a very good chance of making it to the first team.
"And these are players that if you ask Pep today he will tell you they can and will be first team players at Manchester City."