Roberto Mancini also gives Gareth Barry his first start of the season, while Jose Mourinho makes just the two changes from the side that lost to Sevilla on Saturday
Roberto Mancini's side stuttered to a 1-1 draw at Stoke in their last league game and the Italian has made three changes from that side, with Nastasic coming in for Joleon Lescott at the heart of the defence being the only difference at the back.
In midfield Javi Garcia retained his place as he is set to start against one of his former clubs, while Gareth Barry makes his first start of the season after a lower abdomen problem, replacing Scott Sinclair.
Further forward David Silva has also been restored to the starting line-up, starting in place of Mario Balotelli as Carlos Tevez plays as a lone striker.
Real Madrid have made just two changes to the team that played so poorly in the 1-0 defeat to Sevilla on Saturday, with the inclusion of Raphael Varane in defence being the most eyebrow-raising starter.
The young French defender takes the place of Sergio Ramos at the back as he partners Pepe in the centre and their only other change comes in midfield.
Michael Essien is set for his first start for his new club after arriving on-loan from Chelsea and he has replaced Mesut Ozil who was substituted at half-time of the defeat at the Ramon Sanchez Pizjuan.
Real Madrid XI: Casillas, Varane, Pepe, Khedira, Cristiano Ronaldo, Marcelo, Alonso, Essien, Arbeloa, Higuain, Di Maria.
Subs: Adan, Ramos, Kaka, Ozil, Benzema, Coentrao, Modric.
Manchester City starting XI: Hart, Clichy, Kompany, Nastasic, Maicon, Toure Y, Nasri, Barry, Silva, Garcia, Tevez.
Subs: Pantilimon, Zabaleta, Lescott, Kolarov, Rodwell, Aguero, Dzeko.