The 22-year-old was integrated into Pep Guardiola's first team over the summer but has been limited to fleeting opportunities, only making six appearances and scoring once in October's 4-0 Champions League win over Slovan Bratislava.
McAtee has also been restricted to just one Premier League minute against Ipswich Town in August; since that brief cameo he has been an unused substitute in City's last nine top-flight matches.
The fitness troubles of Kevin De Bruyne have not yet led to an increase in first-team exposure for McAtee, who is now in the final two years of his contract at the Etihad Stadium.
The Englishman's situation has supposedly put a number of clubs on red alert, including West Ham United, Fulham and Championship outfit Leeds United, who have come forward with a bid for his services, according to ex-England goalkeeper Paul Robinson.
Robinson reveals Leeds bid for out-of-favour McAtee
"Leeds have made an audacious bid for him. He's had two really good loans at Sheffield United, West Ham have been in the mix and he's been linked with Fulham, but it's not just going to be them," Robinson told Football Insider.
"And what would they be getting for him in January? £20-25million? £30million? There are a lot of clubs that would take James McAtee, whether it be on a permanent or loan deal.
"But I think Pep Guardiola might be selfish between now and the end of the season and keep him. He wants him to be a part of his squad and I think they're going to need him. The amount of injuries this season, you'd have thought he would already have broken into that first-team with the talent he has."
McAtee has been on the books at Man City since 2013 but has only made 13 first-team appearances for the reigning Premier League champions, who loaned him out to Sheffield United for the 2022-23 and 2023-24 seasons.
The 2002-born midfielder helped Sheffield United win promotion back to the top flight in his first season at Bramall Lane, but he was unable to save the Blades from relegation last season.
Would a move away from Man City be best for McAtee?
The uncertainty surrounding McAtee's situation comes at a time where De Bruyne's Man City future is also being called into serious question, as the 33-year-old's contract is up in the summer.
There has seemingly been little movement in talks between the club and De Bruyne over a possible extension, and his more frequent injury problems are unlikely to ease as he enters the twilight of his career.
McAtee would be a like-for-like replacement for De Bruyne in the number 10 slot and could also be useful if Bernardo Silva ever leaves the club, but City may very well dip their toe into the transfer market instead.
A transfer elsewhere in 2025 would therefore be best for all parties, especially if McAtee does not sign a new deal, although Man City expert Steven McInerney is hopeful that the midfielder will choose to stay.