The 20-year-old striker could be one of the players to leave City in the summer after being frozen out of the side following the signing of Gabriel Jesus.
Iheanacho has scored 21 goals despite only making 20 starts in 63 appearances since joining the Manchester side in 2014.
With City expected to have a massive squad clear out in the summer, Iheanacho could be one of the players that are on the move.
The German side Borussia Dortmund are becoming renowned for bringing in the best young talent and can also offer the chance to play in the top flight of German football and the Champions League.
After signing from the Taye Academy which is in Nigeria in 2014, he is still contracted to the Manchester club until 2021.
Dortmund will face competition from fellow German side Hoffenheim and English side Southampton who both enquired about loaning the player next season.