The Malaga manager has been tabbed as Mancini's replacement since the Italian was fired just before the end of the Premier League season.
Pellegrini guided Malaga to their highest ever league finish last season as they ended the campaign in fourth to qualify for their debut in the Champions League.
They went on to reach the last-eight of the competition and were only seconds away from beating eventual losing finalists Borussia Dortmund to reach the semi-finals.
"I have a verbal agreement with them and I hope it is carried out," he said in an interview with the Andalusian television station Canal Sur on Wednesday.
"As of today, I don't have a signed contract.
"It is true that Manchester City have shown a lot of interest that I become their coach and I have had conversations with them.
"Until things have been signed, you cannot say everything is completely done."
Source: Manchester City MAD
Source: FOOTYMAD
