The Premier League champions were aggressively chasing the Brazilian midfielder and the player was keen on the move.
Following two rejected verbal offers, Manchester City offered a deal worth £60m and were ready to go higher to get their man.
Pep Guardiola had spoken with the player and the midfielder was sold on joining the champions this summer.
But it has been claimed that Manchester City have now backed out of their pursuit of the West Ham star in the ongoing transfer window.
The transfer has been called off and there are suggestions that it was done due to confidential issues.
Manchester City are hurriedly focusing their efforts on other targets as they still want a creative midfielder.
However, the decision to call off the pursuit of the West Ham star remains cloaked in secrecy.
David Moyes will be relieved as he was reluctant to lose another key midfielder following the sale of Declan Rice earlier in the window.
