The Malaga boss, who is said to be leaving the club at the end of the season, has denied reports suggesting that he has accepted an offer to take over from Roberto Mancini
The Chilean, 59 has been widely tipped to be the next man in charge at the Etihad Stadium and Goal understands that Mancini could be out of a job within the next 48 hours.
City officials have so far refused to comment on the increasing speculation which began on Friday on the eve of the FA Cup final before swiftly developing after City's defeat on Saturday.
Despite the strong suggestions that indicate that Pellegrini is set to be announced as Blues' new manager imminently, the current Malaga boss has denied that a deal has been signed.
"I categorically deny that I am the new Manchester City coach, nothing has been signed and no agreement reached," Pellegrini told the club's official website.
"I’ve been fortunate enough, and very proud, that every year the big clubs are interested in me.
"I have an agreement with Malaga not to talk to anyone and nothing has been agreed with any other outfit. I hope the future of this club will become somewhat clearer in the next few days."
Pellegrini has been on City's radar since early 2013, with club officials allegedly meeting with the Chilean's agent in January, though questions about Pellegrini taking over were met with frustration by Mancini in February.
Pellegrini himself has recently claimed that staying at La Rosaleda during their current financial restraints may be difficult, fuelling rumours he is set to swap La Liga for the Premier League.