Manager Pep Guardiola revealed Friday that the German winger rejected City's new contract offer while informing the club he wants to join another team.
"Leroy says he doesn't want to extend his contract. That means he's going to leave," Guardiola told reporters, according to The Athletic's Sam Lee. "If we find an agreement with a club, he will leave this summer. If not, he'll stay another year and will leave at the end of his contract."
Bayern Munich remain confident of signing Sane this summer, according to The Guardian's Fabrizio Romano. The 24-year-old reportedly agreed to terms on a five-year contract with the eight-time Bundesliga champions in May.
City reportedly want around €50 million for Sane, but Bayern are apparently offering about €10 million less.
With Sane's contract expiring in June 2021 and the coronavirus pandemic causing economic difficulties across the board, City dropped their asking price from the initial €125 million they were seeking for the player last year.
The Premier League giants reportedly rejected an €80-million offer from Bayern in 2019.
Sane hasn't played for City since suffering an ACL tear in the Community Shield in August.