The Argentina striker, who is currently on holiday after the Copa America and Olympics, has made no secret of his desire for more meaningful game time this season.
Atletico have twice approached City to discuss Alvarez this summer and are now close to agreeing a payment structure that suits both parties.
Alvarez’s departure will represent a record sale for the Premier League champions, eclipsing the £55m Barcelona splashed out on Spanish forward Ferran Torres.
It leaves Pep Guardiola with a decision to make on whether to replace Alvarez, who featured in more matches than any other City star last term.
Atletico Madrid are close to finalising a deal for Manchester City forward Julian Alvarez
The City boss suggested last week that the club will only dip into the transfer market if one of their current crop moves elsewhere.
Alvarez chipped in with 36 goals in 103 appearances across two seasons for City and acted as a back up for Erling Haaland while also being deployed as an attacking midfielder.
The 24-year-old - who has already won every major trophy in world football – joined City from River Plate for £14m in 2022.