The Premier League club are keen to add an experienced defender to their ranks in light of Matija Nastasic's injury but face a fight to land Real Madrid's Portuguese international.
Manuel Pellegrini has given the green light to Manchester City's renewed pursuit of Real Madrid's Pepe.
City made a tentative enquiry for Pepe last month but were unwilling to meet the Spanish giants' €35m valuation of the 30-year-old but are hopeful of finding a resolution, particularly with Madrid keen to secure funds in order to finance their attempts to broker a deal to bring Gareth Bale to the Bernabeu.
Matija Nastasic’s ankle injury, which he picked up during the club’s pre-season tour of Hong Kong, will keep the Serbia international out of action for the first six weeks of the season and has accentuated City’s need for a new defender.
Having been eliminated during the group stages of the Champions League in each of the last two seasons, Pellegrini had identified the need for an experienced centre-half before Nastasic was stretchered off against Sunderland in the final of the Barclays Asia Trophy a week ago.
The Spanish giants are unlikely to let the man they signed from Porto for €27m six years ago leave without a fight, especially considering Raphael Varane, the player who took Pepe's place in Jose Mourinho's starting XI last season, is still nursing his way back from knee surgery.
Moreover, the player himself insisted earlier this week he was determined to battle for his place in the plans of new Madrid manager Carlo Ancelotti.
He said: "I have signed a contract with Madrid, my future is an issue for the president," he said. "I just train hard and try to give my best for the team. I am ready to fight for my place."
City have already spent close to £100m on reinforcements this summer in the shape of former Sevilla duo Alvaro Negredo and Jesus Navas as well as Br azil international midfielder Fernandinho and Montenegro forward Stevan Jovetic. They begin their Premier League campaign against Newcastle at the Etihad Stadium on Monday.