The 19-year-old attacking midfielder was a standout performer who helped City's Under-23s side win the Premier League 2 title last season, recording 18 goals and seven assists in 23 league appearances.
McAtee has featured six times for Pep Guardiola's senior team, but his first-team opportunities could be limited in 2022-23 considering the plethora of attacking talent already at the Spaniard's disposal.
A switch to a fellow Premier League club has been mooted for McAtee, with Leeds, Brighton & Hove Albion and Southampton all believed to be closely monitoring his situation.
While a loan move seems more likely for McAtee, Daily Express journalist Ryan Taylor claims that Leeds will look to sign the teenager on a permanent basis this summer, and has compared this potential deal with the transfer of Lewis Bate from Chelsea to Elland Road last summer.
Leeds have already reached an agreement with Man City to sell star midfielder Kalvin Phillips for an initial £42m, while the Whites are also in negotiations over a move to sign Citizens teenager Darko Gyabi in a separate deal worth £5m.