Birmingham fan Gardner admitted it was "a dream come true" when he made the move from local rivals Aston Villa to St Andrew's during the January 2010 transfer window in a £3million deal.
He celebrated by finishing as leading scorer with 10 goals in his only full campaign at Blues and helped them lift the Carling Cup.
But Gardner's desire to play Premier League football, plus City's wish to reduce their wage bill after being relegated, will lead to a parting of the days.
It is understood Gardner is one of the City players who did not have a clause in his contract which would lead to his salary being reduced following relegation.
Sunderland are looking to bolster their midfield options after selling Jordan Henderson to Liverpool for a fee which could rise to £19.25million.