Cancelo was a key figure in Guardiola's title-winning side of 2021-22, and also featured heavily during the first half of the treble-winning 2022-23 campaign.
However, a mid-season fallout with the Man City boss resulted in a surprise loan move to Bayern Munich during the January transfer window as Cancelo spent the second half of the campaign in Germany.
The 29-year-old helped Thomas Tuchel's side to another Bundesliga title during his time in Bavaria, but Bayern have opted against making his loan move permanent.
Cancelo is still expected to leave the Etihad Stadium on a permanent basis this summer, though, with The Athletic reporting that Guardiola has made a final decision that the defender should be transfer listed.
The report claims that Guardiola has no plans to bring Cancelo with the squad on their pre-season tour of Japan, and is hopeful of offloading him before they depart.
Arsenal and Barcelona have both been credited with an interest in the Portugal international, who is thought to be available for a cut-price fee.
Cancelo only missed two league games during Man City's 2021-22 season and appeared 52 times across all competitions that year as he established himself as one of the most highly-regarded full-backs in world football.
In total, Cancelo has made 154 appearances for the Citizens since joining for a record fee for a right-back in 2019.
During that time, the Portuguese has won three Premier League titles, the Champions League, the FA Cup and the EFL Cup.