The former Liverpool star has reportedly been stalling on a new deal in recent months due to an impasse when negotiating his wage demands.
However, Sky Sports claim Sterling is happy to stay at the Premier League champions and those reports are wide of the mark.
And the 23-year-old will now hold talks with Manchester City director of football Txiki Begiristain before the end of this month.
Citizens boss Pep Guardiola is keen for Sterling to remain at the Premier League club beyond 2020 when his current deal expires.
Speaking over the weekend, the Spaniard said: “It’s well known we’re delighted with him and would like him to continue.
“My club knows my opinion and we share that.
“After that it is the club and the agent.”
However, bookmakers think Sterling could be on his way out of Manchester in the near future.
Ladbrokes have Real Madrid as the firm favourites to land the England international should he choose to leave the club.
The betting company have Los Blancos priced up as 2/1 favourites to lure the winger to the Santiago Bernabeu.
Alex Apati of Ladbrokes said: “Sterling has enjoyed a solid start to the season, but with contract talks ongoing and Madrid eyeing some mega-money moves next summer, we wouldn’t be surprised to see the youngster swap Manchester for the Spanish capital.”
Manchester City are preparing for their first Champions League group stage clash of the season tomorrow, where they will take on Lyon.