Milan chief executive Adriano Galliani revealed the news when asked by journalists whether or not Brazilian forward Alexandre Pato is for sale.
"We are not negotiating the sale of Pato, I have an agreement with Tevez but not with City," he said.
Galliani said on Thursday he had sent an "imaginative" offer to City which the Italian press claim consists of a loan until the end of the season with an obligation to buy, under set conditions, in the summer.
However, City have already rejected a previous offer from Milan to borrow the player, claiming they will only sell him outright.
Italian press on Saturday claimed Inter Milan have entered the bidding by offering 25 million euros for the 27-year-old.
Both of those bids, however, are believed to be well below the 35 million euros French league leaders Paris St Germain have allegedly offered.