The midfielder impressed with displays on loan at Mechelen in Belgium last season and has been tipped to move to another club this summer.
Scottish champions Celtic are keen, but a deal has been slow to happen as City Football Group decide what to do with Souza.
Now they appear to have decided and, according to Spanish radio programme Esports COPE, he is heading for Espanyol.
The City Football Group are not allowing Souza to move permanently though and he will sign for Espanyol on a loan deal.
The news appears to end Celtic’s hopes of adding the midfielder to Ange Postecoglou’s ranks in Glasgow.
Souza will look to make an impression at Espanyol as he steps up a level in La Liga, having previously played in Belgium.
Espanyol finished in 14th spot in La Liga last term, just four points above the drop zone.
