The Chile international is believed to have been on Pep Guardiola's radar for a while, but the two-time Premier League champions have just two days to complete a transfer before the summer window closes.
According to Sky Sports News, though, Arsenal would prefer Aguero, who scored 20 Premier League goals and created three assists in 31 appearances last season.
Man City will make offer for Alexis Sanchez. Willing to offer Raheem Sterling to Arsenal as part of deal. 1 source says Arsenal want Aguero— Kaveh Solhekol (@SkyKaveh) August 29, 2017
Sanchez's future at Arsenal has been in doubt since last season when he opted against signing a new contract, which has put him in the final year of his current deal.
It is believed that the 28-year-old has requested permission from the Chile national team to leave the camp amid speculation over a possible transfer.
Sanchez joined Arsenal from Barcelona in 2014 for a fee in the region of £31m.