The Sky Blues are happy to pay around £20 million for the centre-back.
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Manchester City will launch a bid to sign Real Madrid centre-back Pepe, who was recently captured on television trying to stamp on Barcelona star Lionel Messi, The Daily Mirror reports.
Manuel Pellegrini managed Pepe during his time as Real Madrid manager and is keen to partner the Brazilian with current City captain Vincent Kompany.
Pellegrini is convinced that Pepe and Kompany can form a formidable central defensive partnership together and Madrid could be persuaded to part with the Brazilian and spend the money they raise from his sale on some of their transfer targets.
However, Real Madrid president Florentino Perez recently stated that he expects Pepe to remain with the Spanish giants this summer.
That may not stop City putting in a bid of around £20 million for the centre-back, an amount that may make Perez have second thoughts about keeping the Brazilian at the Bernabeu.
With Pepe possibly coming to the Eithad, Jolean Lescott could be on his way out.
The defender struggled to get into the Sky Blues first team last season and is known to be desperate for first team football.
Should City sign Pepe, the chances of regular first team football for Lescott would be slim, meaning he may have to move away from the Etihad.