The Premier League champions are said to have lodged a £45 million ($57m) bid to sign the Frenchman during the previous transfer window.
City boss Pep Guardiola has tried and failed to acquire a number of players to compete with current first choice holding midfielder Fernandinho in recent years, including the likes of Fred and Jorginho.
Ndombele continues to be linked with a move to the Etihad but says he's very happy with his decision to remain at Lyon this season.
“I could have gone, maybe things would have worked out well," the midfielder told Canal Football Club.
"The club was firm, they didn’t want me to leave. I didn’t feel like leaving, and I think that today you can see that it was the best decision for me.
"Things are going well, I am playing a lot of games, and I am in the French national team.
"So, I think for the moment it was the best decision.”
His good form led to a senior France debut in October and he has gone on to make four more appearances for Didier Deschamps' side since.
It seems inevitable that Ndombele will eventually move on to a bigger club, but the 21-year-old insists that there is no specific club that he sees himself playing for in the future.
He does, however, hint that he could be open to a move to PSG.
“I don’t imagine how my career will go, I live it instead…" he added.
"Of course they are big clubs, I don’t close the door to anyone…
"They (PSG) remain one of the biggest clubs in France, I am from a Paris banlieue…”