The report quotes sources in Germany who allege that City officials held talks with Dortmund after last month's Premier League match against Queens Park Rangers.
The two parties made initial contact over a £20m move for the Bosnian striker, and the report claims it's now almost inevitable that Dzeko will return to Germany.
He spent four years in the Bundesliga with Wolfsburg, and was a huge hit in the German top flight, scoring 66 goals in 111 league matches.
The Bosnian international joined City for £27m in the 2011 January transfer window, but has struggled to hold down a first-team place at the Etihad Stadium.
He's been primarily used as a substitute by Roberto Mancini this term, and was linked with a move away from Manchester City during the January transfer window.
Despite a lack of first-team opportunities, Dzeko is still the club's joint top scorer with 13 goals so far this season.
And he's made telling contributions at various points throughout his short Manchester City career - most tellingly against Queens Park Rangers on the final game of the season last year.
Dzeko came off the bench to score a 92nd minute equaliser, before Sergio Aguero bagged the Premier League title winning goal in the last minute of the campaign.
The Bosnian has scored 28 goals in 68 Premier League game for City. Borussia Dortmund are unlikely to defend their Bundesliga crown this term, as Bayern Munich are running away with the league.
Dortmund have won the past two championships, spearheaded by Poland international Robert Lewandowski. But the Polish forward has been linked with a move away from Dortmund in the summer, and the German giants could sign Dzeko as a direct replacement.