The 30-year-old spent the 2023-24 campaign on loan at Barcelona, contributing four goals and five assists in 42 competitive appearances.
Having seen his loan spell come to an end, the Catalan giants are keen to bring Cancelo back to the club for Hansi Flick's first season in the dugout.
Cancelo has a contract with Man City until June 2027, but he does not feature as part of the club's plans following a breakdown in relationship with head coach Pep Guardiola.
While he is expected to leave Man City this summer, it is currently unclear whether he will be able to return to the Catalan giants.
Barcelona priced out of Cancelo deal
According to Mundo Deportivo, Barcelona are not in a viable position to meet Man City's €30m (£25.3m) asking price for the defender.
The player's significant salary could also prove to be an issue, with Barcelona hoping the player's agent Jorge Mendes can find a suitable compromise for all parties.
The report claims that the Blaugrana ready to trust the players they already have if they are unable to strike a deal for Cancelo.
France international Jules Kounde remains an option for the right-back spot, while Flick could also turn to Hector Fort and Julian Araujo.
Could Barcelona still sign Cancelo this summer?
Although they will not take any unnecessary risks, Barcelona are still hoping to find a solution that will enable them to re-sign Cancelo this summer.
As per the Daily Star, the Blaugrana are ready to make a fresh proposal for to sign Cancelo on another season-long loan deal.
Barcelona are willing to pay Man City a £7m loan fee with an obligation to make the move permanent for £18m next summer.
However, the Catalan club are facing competition for Cancelo's signature, with Juventus and Inter Milan believed to be among his potential suitors.
The Portugal international is also attracting interest from clubs in the Saudi Pro League, who should have no issues with meeting Man City's financial demands.