City boss Pep Guardiola is desperate to strengthen his squad to rebuild and launch a better title challenge next season.
They have identified left back as one of the key areas to improve and Alaba's current contract stand-off has alerted City to his potential availability.
Alaba, 28, is regarded as on of the best full backs in Europe but has only got one year left on his current deal at Bayern and the German champions have warned they may have to sell if he does not sign a new contract.
It has alerted a host of top clubs with Inter Milan keen while City are watching developments closely amid concerns over Benjamin Mendy's consistency and his deputy Oleksander Zinchenko has struggled to plug the gap at times.
City are ready to back Guardiola in the market this summer as they look to get a new left back, centre back and potentially a new forward.
Alaba worked under Guardiola during the City boss's time at Bayern but there may be concerns over the Austria international's age, contract demands and also price-tag.
Bayern still want Alaba to sign a new deal even with the emergence of Alphonso Davies at left back because he can play different positions but Bayern have also made it clear they will not allow him to leave for free next year.
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