The 29-year old had fallen down the pecking order under Pep Guardiola and with suggestions of City keen to sign Antonio Rudiger next summer, the future of Otamendi remains unclear.
According to Spanish newspaper El Confidencial, Jorge Mendes who is also an agent for Cristiano Ronaldo and Jose Mourinho, is in contact with Real Madrid over a potential deal as the Los Blancos had lost the defender to City two seasons ago.
With future of Pepe still unclear as the Portuguese defender is yet to sign a new contract among links to Chinese Super League, Otamendi would be an ideal replacement for the departing star.
Last month, Pepe’s agent Sendoa has revealed that Otamendi could be an ideal replacement for Pepe next season.
“Pepe is leaving Real Madrid and Otamendi fits the profile they are looking for,” Martin Sendoa said.
“Jorge Mendes [Cristiano Ronaldo’s agent] is also managing Otamendi in Europe. Barcelona have also followed him since he was at Valencia.
“Nico is happy at Manchester City. But who wouldn’t like to play at Real Madrid? It’s the biggest club in the world.”
The 29-year old would be an ideal partner for Sergio Ramos in central defense and could once again reach his top form as he was a proven defender in La Liga with Valencia earlier. Jorge Mendes might have more deals with Real Madrid as he is also the agent for Manchester United goalkeeper David de Gea.