Arsenal face losing their star forward in 2018 either for a cut-price in the New Year of for free next summer.
The 28-year-old has opted against signing a contract extension, leaving the Gunners almost powerless.
City saw a £60m bid accepted on deadline day in the summer, but Arsenal pulled out of the deal due to their failure to land a replacement.
Sanchez has continued to feature, although it appears his end at the Emirates is edging near.
According to The Telegraph, Arsenal players believe Sanchez will be allowed to go in January.
City are subsequently expected to make another move and table a cash offer.
Having refused to include winger Raheem Sterling as part of any deal, a significantly lower fee than £60m is set to be put forward.
The Daily Mail suggest it could be around the £20m mark.
Pep Guardiola has not given up hope of reuniting with former Barcelona ace Sanchez this season.
And due to Arsenal's participation in the Europa League, the Chile international would be eligible for the knockout stages of the Champions League too.
Following an extended period of uncertainty surrounding Sanchez's future, The Telegraph add some Arsenal players will be relieved the saga is set to end.
It is said some feel his contract refusal, desire to go and the constant speculation has had a damaging effect on the squad.
Arsenal's willingness to sell may depend how they are faring in the Premier League, whether a replacement is lined up and how much pressure Arsene Wenger is under.
PSG's Julian Draxler is a target, but it is claimed the French club are reluctant to lose him this season.
