Pellegrini 'free to leave Malaga'
The Chilean coach is the red-hot favourite to fill the vacancy left by Monday's sacking of Roberto Mancini, and the Liga club have smoothed his anticipated path to the Etihad Stadium.
His current contract at La Roselada runs for another two years but it has been reported in Spain that Malaga have agreed to let him go on June 30 without demanding the 4m euros detailed in a release clause.
Pellegrini, 59, managed Real Madrid for a season before taking over at Malaga in 2010 - helping the club qualify for the UEFA Champions League and reaching the quarter-finals of this year's competition before being ousted by finalists Borussia Dortmund.
With the City position available and Chelsea set to say goodbye to interim boss Rafa Benitez at the end of the season, Pellegrini had reportedly been sounded out by the Blues in April but is now widely expected to take the reins of the 2011/12 Premier League champions.
After Pellegrini was leap-frogged in the betting for the Chelsea job by Antonio Conte of Juventus, Jose Mourinho has been cemented as favourite to return to Stamford Bridge - although the Real boss also remains in the frame for the City post.
Mancini was axed by City on Monday shortly after their FA Cup final defeat to Wigan, with their failure to defend the Premier League title and inability to make progress in the Champions League also contributing to his downfall.