City are bidding to make a mark in the Champions League after two successive failures but face a stern test of their credentials as the European champions visit the Etihad Stadium this week.
The two clubs met during City's maiden Champions League campaign two years ago.
City were beaten in Munich - in the match which sparked the infamous Carlos Tevez row - and although they won at Eastlands, the Germans fielded a much-changed side having already secured progress.
Dzeko, who also has unhappy memories of the clash at the Allianz Arena after his own dispute with then manager Roberto Mancini, believes much has changed since then.
The Bosnian said: "We've played a few years together and we also have four new players and they've improved the squad.
"We're definitely better this year than last.
"We don't have to think about the last two years because it's done.
"We didn't get out of the group but we have started this season in the Champions League very well and that's important for the team and the confidence.
"Now (we are) at home against the big rival in the group and we want to beat them and stay in the first position."
City opened their challenge with a comfortable 3-0 win over Viktoria Plzen a fortnight ago.
German giants Bayern will provide a much sterner test in their next Group D fixture but Dzeko is looking forward to the challenge.
The 27-year-old, who is thought to be vying with Alvaro Negredo for a spot up front, said: "I don't know if they are stronger this year but they were strong last year.
"We know that and they're defending the Champions League.
"Every player wants to play in the big games against the big teams and the 11 have to give more than 100 per cent to try to win the game.
"Our fans will be there and we'll give everything, that's for sure."
City showed how good they can be just over a week ago when they thrashed Premier League champions and neighbours Manchester United 4-1.
They came unstuck last weekend as they were beaten at Aston Villa but Dzeko says confidence is high under new boss Manuel Pellegrini.
He said: "Of course the people are expecting us to play like that and that's what we are trying to do with the new manager, to play aggressive, quick and attacking football.
"We showed that against a big club like Manchester United and why shouldn't we go forward with that and be more consistent with those games?
"It's just the beginning of the season and I am sure we will improve."
Dzeko is enjoying life under Pellegrini.
The former Wolfsburg striker has found the net four times this season and has been shown faith by Pellegrini after appearing to fall out of favour under Mancini.
Dzeko said: "I've said it before; the manager is very important and for every player it's important to know the manager believes in him. He gives confidence that can change everything."
Dzeko was linked with a move away from City in the summer but he insists he was always happy at the club.
He said: "I think there was a lot of speculation from journalists but I never heard from the club they wanted to sell and you never heard from me that I wanted to leave."
Two years ago City's presence in the Champions League attracted negative comments from some rivals due to their heavy spending power.
Bayern chairman Karl-Heinz Rummennigge was one of the most outspoken but City are now looking more settled among Europe's elite.
Rummennigge was even due to speak about European football alongside City chief executive Ferran Soriano at a dinner hosted at the Etihad Stadium on the eve of the match.
Pellegrini was unwilling to discuss financial matters at his pre-match press conference but Dzeko highlighted the importance of the players pulling their weight on the field.
He said: "The club is improving, bringing some great players, a new manager. We want to improve as a club on the pitch and altogether."