The 19-year-old attacking midfielder excelled for the Citizens' academy side last season and was named the Premier League 2 Player of the Season after recording 17 goals and seven assists in 22 league games.
McAtee has recently been linked with a potential switch to Brighton & Hove Albion as part of a deal which would see left-back Marc Cucurella move to the Etihad Stadium on a permanent basis.
However, The Sun reports that the teenager could make a temporary move to Huddersfield after the international break, with the West Yorkshire club moving ahead of fellow second tier side Swansea City in the race for his signature.
McAtee came off the bench to make his England Under-21s debut in the 5-0 win over Kosovo on Friday, and the report adds that Terriers boss Carlos Corberan could meet with the midfielder after the Young Lions face Slovenia at the John Smith's Stadium on Monday.
Huddersfield have taken a number of promising players on loan from Premier League clubs in recent years, including Chelsea pair Levi Colwill and Trevoh Chalobah as well as Arsenal's Emile Smith Rowe.
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