Manchester City sporting director Txiki Begiristain held talks with Arsenal transfer target Mario Gotze's representatives last month over a proposed €40m move to the Etihad Stadium, according to reports in Germany.
The Borussia Dortmund star is one of the most highly regarded young players in the world, and his performances in this year's Champions League have attracted interest from the Premier League.
Arsenal boss Arsene Wenger is thought to be a huge admirer, but the Gunners may struggle to match the financial muscle of Manchester City.
German publication Kicker claims City director Begiristain travelled to Germany to hold talks with Volker Struth, manager of the Cologne-based agency Sport Total, before Dortmund's Champions League last-16 match against Shakhtar Donetsk. As well as representing Gotze, Struth is for the agent for Marco Reus and Toni Kroos.
Gotze reportedly has a €40m (£34m) minimum fee release clause in his Borussia Dortmund contract - a deal that runs until the summer of 2016.
The 20-year-old two-time Bundesliga winner has been the subject of interest from the Premier League before, but it now seems Manchester City are making the first proper move.
The defending Premier League champions are 12 points behind Manchester United in the title race, and look set to cede the trophy to Sir Alex Ferguson's side this term.
Reports have tipped Roberto Mancini to spend big in the summer to mount a renewed assault on the Premier League next season, and a €40m move for Arsenal target Gotze could be the start of a summer of spending for the Etihad Stadium side.
Gotze and Dortmund progressed in dramatic style to the Champions League semi-finals, beating Malaga 3-2 with two injury-time goals on Tuesday evening.
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