The 28-year-old is set to leave the Etihad Stadium this summer after enduring two forgettable years since arriving from Leeds United.
Phillips started just two of his 12 Premier League appearances in his first season with Pep Guardiola's side, before he failed to feature in the starting lineup of any top-flight game in the first half of the 2023-24 campaign.
The former Leeds man subsequently went on to experience a disappointing loan spell with West Ham United in the second half of last season.
Phillips was restricted to just three starts in 10 Premier League appearances, ensuring that there was no possibility that the Hammers would consider a permanent transfer.
Everton lead Phillips race
Despite featuring in Man City's pre-season fixtures, Phillips does not feature in Guardiola's plan and is now looking for a new home to revive his career.
It was recently reported that Roma, Galatasaray, RB Leipzig and Red Bull Salzburg have all shown an interest in Phillips, while Aston Villa have been mentioned as a potential suitor.
However, according to Football Insider, Everton are leading Aston Villa in the race to sign Phillips from Man City this summer.
The report claims that the Toffees are unable to meet Man City's valuation but are keen to reach an agreement over a loan move.
There is a belief that Phillips would prefer a permanent move, but a loan departure will become more likely as the transfer window gets closer to the August 31 deadline.
Why are Everton targeting Phillips?
Everton are looking to bolster their midfield options after seeing Amadou Onana depart for Aston Villa earlier this summer.
The Toffees recruited Tim Iroegbunam prior to Onana's exit, but the Toffees are still keen to bring in further reinforcements in the engine room.
As it stands, Sean Dyche's current central-midfield options are Iroegbunam, Idrissa Gueye, Abdoulaye Doucoure and James Garner.
In addition to Iroegbunam's arrival, Everton have bolstered their squad with the additions of defender Jake O'Brien, attacker Jesper Lindstrom and forward Iliman Ndiaye.
The Toffees will wrap up their pre-season schedule with a game against Roma on Saturday, before they kick off their Premier League campaign with a home match against Brighton & Hove Albion on August 17.