According to The Mirror, City watched the former Everton loanee during the World Cup. Donovan scored three goals in four matches, including a last-gasp winner against Algeria that sent the USA to the knockout stages.
Roberto Mancini is determined to rebuild City this summer after they narrowly missed out on a Champions League spot to Tottenham last season.
The Eastlands club are close to a £20 million move for Barcelona midfielder Yaya Toure and are keen to sign Aston Villa starlet James Milner as well.
However, City also scouted Donovan and Portugal winger Fabio Coentrao, who counts Real Madrid, Bayern Munich and Juventus as his suitors this summer, in South Africa.
Donovan is currently under contract with MLS side LA Galaxy but could be persuaded to make a permanent move to England to further his football career, after admitting he enjoyed his loan spell at Everton in January.