The 20-year-old midfielder spent last season on loan at Sheffield United and played a key role in helping them to get promoted to the Premier League.
Paul Heckingbottom is keen to take him back to Bramall Lane this summer as he looks to build a squad to survive in the top tier of English football.
Southampton are also interested in signing McAtee on loan and are hopeful that Manchester City will allow him to return to the Championship again.
But it has been claimed that McAtee leaving is dependent on Manchester City signing a creative midfielder or two.
The Premier League champions have abandoned their pursuit of Lucas Paqueta due to an FA investigation into breaches of betting rules.
McAtee has been part of Pep Guardiola’s squad at the start of the season in the Premier League.
Manchester City want to bring in a couple of creative midfielders before agreeing to loan out the youngster.
