Chilean star Sanchez, 28, has been courted by City all summer and wants to link up with his former manager Pep Guardiola who sees him as the final piece in the puzzle to mount a title challenge this season.
Alexis has rejected the offer of a new deal at the Emirates Stadium with his current contract set to expire in the summer of 2018, and City have been confident for several months that the player's stance will lead to Arsenal eventually giving into his demands.
City had been confident of bringing Alexis to the Etihad Stadium, but the Gunners have been steadfast in their insistence that the Chile international is not for sale and rejected a £50 million offer from the Etihad side as recently as Tuesday.
However, the Gunners are prepared to let last season's star man leave the club for a fee in the region of £70m if they can bring in a replacement of similar quality, with Paris Saint-Germain star Julian Draxler one of several options the club are looking at.
Sanchez is expected to start for Chile in their World Cup qualifier against Paraguay tonight which kicks off 30 minutes after the transfer window closes in the United Kingdom.