The German midfielder will sit out Monday's clash at Molineux after contracting coronavirus and will now follow quarantine protocols to contain any potential spread of the illness at Ethiad Stadium.
City also confirmed positive tests for Riyad Mahrez and Aymeric Laporte earlier this month, with Pep Guardiola now facing a selection dilemma for the Citizens' return to domestic action.
The Spanish head coach revealed in his pre-match press conference that Mahrez will be available for the trip to Wolves after observing a 10-day isolation period, but Laporte will be left out having only just returned to full training.
City have delivered an update on Gundgoan's condition via their official website: "Manchester City can confirm that Ilkay Gundogan has tested positive for Covid-19.
"Ilkay is now observing a 10-day period of self-isolation in accordance with Premier League and UK Government protocol on quarantine. Everyone at the club wishes Ilkay a speedy recovery."
Guardiola will also be without talismanic forward Sergio Aguero when his side open their latest campaign, with the Argentine still recovering from surgery on a knee injury suffered during a clash with Burnley back in June.
One man who could be welcomed back into the fold is England international Phil Foden, who was sent home from international duty with Manchester United striker Mason Greenwood after breaking social distancing rules by inviting women into his hotel room in Iceland.
Guardiola lept to the defence of the young midfielder when quizzed on his disciplinary breach, telling reporters: "He knows he made a mistake and that's all. I am pretty sure Phil is going to make a good season. He knows he made a mistake. Stop giving too much advice to other people."
The Blues manager will otherwise have a full squad to choose from, with new signings Nathan Ake and Ferran Torres both in line to make their full debuts at Molineux.
The trip to Wolves is City's first game of the 2020-21 season, having been allowed an extended break following their involvement in the delayed Champions League knock-out stages in August.