La Liga boss Javier Tebas demanded UEFA look into the recent spending of the Premier League giants as well as Paris St-Germain.
But European football’s governing body believe Pep Guardiola’s men have no case to answer and will not be launching an investigation.
UEFA are already probing PSG’s spending.
But a UEFA spokesperson said: “There is no investigation into Manchester City with regards to Financial Fair Play regulations. Any reports mentioning such an investigation are unsubstantiated.”
Guardiola has spent more than £215m this summer on new signings - the biggest by any club in a transfer window.
Etihad bosses have landed Kyle Walker (£45m), Portugal midfielder Bernardo Silva (£43m), Brazilian goalkeeper Ederson Moraes (£35m) and France defender Benjamin Mendy (£52m).
But the billionaires, who were bought by the Abu Dhabi United Group in 2008, also sold several players as well including Kelechi Iheanacho, Wilfried Bony and Aaron Mooy to leave their net spend at about £130m.
Tebas said: “The funding of PSG and Manchester City, thanks to state aid, distorts European competitions and creates an inflationary spiral that irreparably damages the football industry.”
PSG more than doubled the world record transfer fee last month when signing Brazilian ace Neymar from Barcelona in a stunning £200m deal.
The Qatari-owned outfit have also landed Kylian Mbappe on loan from Monaco in a deal that is expected to be made permanent next summer for £165m.
City were punished for an FFP violation in 2014 when they were hit with a fine, transfer spending cap and a Champions League squad restriction.
