The 21-year-old was watched in midweek as he scored during Gladbach's Europa League away goals defeat to Bundesliga rivals Schalke.
City boss Pep Guardiola is aware of the Syrian-born youngster's burgeoning reputation, having seen first hand the all-action midfielder's rise at Borussia Park last season while still in charge of Bayern Munich.
And with the Spaniard set to overhaul his ageing City squad this summer, the Germany U21 international - who already boasts two years of Champions League experience - is rising up his hitlist.
Dahoud has come through a difficult start to the campaign - he was dropped by ex-boss Andre Schubert over contract issues - to star once more for Gladbach under new boss Dieter Hecking.