The 20-year-old has been a revelation since coming through the ranks at the French club, making 26 appearances in Ligue 1 since 2016.
His form has caught the eye of a number of clubs and Chelsea have also sent scouts in the last few months.
City have heard positive reports from both Mikel Arteta and Txiki Begiristain, with the duo watching Lyon win their Europa League clash against Everton at Goodison Park last month.
City are hoping to pip Chelsea to the deal by possibly including centre-back Eliaquim Mangala in a package.
Mangala spoke to Lyon in the summer and a potential transfer could now be on the cards in January as coach Pep Guardiola looks to strengthen his ranks at the back.