Walker was axed for the North London derby with Arsenal when Kieran Trippier was chosen ahead of him and there is a growing belief the England full back could be sold this summer.
Tottenham right back Walker, 26, has held talks with Mauricio Pochettino and knows he can more than double his current £55,000-a-week contract if gets a lucrative move this summer.
City have identified Walker as a prime summer target as Pep Guardiola looks to strengthen his squad with full backs among his top priority.
It was a big statement from Pochettino to leave Walker out in such a key game but it may be a sign of things to come.
Walker is still committed and has not let his level drop in training but City could prove an attractive option. Tottenham may be tempted if they get a huge offer as they already have Trippier and that could allow them to strengthen elsewhere with Burnley’s Michael Keane one of Pochettino’s targets.
Pochettino and Wenger react to Spurs 2-0 Arsenal
Pochettino is also keen on Crystal Palace winger Wilfried Zaha but faces a difficult battle to get him.
Palace are ready to offer Zaha a new deal worth in excess of £100,000-a-week while his decision to play for Ivory Coast means he will be on African Nations Cup duty as well.
Tottenham remain in pole position for Ross Barkley if the Everton midfielder leaves Goodison Park this summer.