City manager Pep Guardiola had been eager to sign the Tottenham Hotspur sensation this summer to increase the number of English players in his squad to meet the requirements of the Premier League.
The Etihad outfit will also find it difficult to snap up Alli from Spurs because he has a long-term contract with the London team until the end of the 2021-22 season.
Milton Keynes-born Alli joined Tottenham Hotspur in February 2015 before he was immediately loaned back to MK Dons for the remainder of the season.
The 21-year-old attacking midfielder has been nominated for the PFA Young Player of the Year.
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