Grant, 26, snapped up from Derby's reserves in July 2007, was in fine form for the Owls last season and rewarded with a new three-year deal at the end of the season.
Wednesday manager Laws told the Sheffield Star: "This is a load of rubbish. Lee has just signed a new contract. He's settled and we've said many times he's not for sale. Manchester City have not made any contact with us."
Laws added: "We know we have a great goalkeeper. It's nice to know that we have players who have the ability to play at a higher level and people are recognising that fact.
"It has been proved that it was a smart move when we signed Lee from a club where he was not first choice. We knew he had the potential and he has started to show what he's all about."