The Chilean has already confirmed he is to leave Malaga at the end of the season and has been widely tipped to take over from Roberto Mancini at the Etihad.
And speaking after the Spanish club's last home game of the season on Sunday, a 3-1 win over Deportivo La Coruna, Pellegrini admitted City are in his thoughts.
"I am lucky to have good options and Manchester City is an option," he was quoted as saying on marca.com.
City sacked Mancini after the club failed to kick on from their Premier League title win last year, with performances in the Champions League particularly disappointing.
Speaking on the club's tour of the United States, chief executive Ferran Soriano said recently that City would be targeting five trophies in the next five years under their new boss.
City have not yet confirmed the 59-year-old is the man they want but, when asked, Soriano did nothing to deny the intense speculation linking them with the Chilean.
Pellegrini, also a former Real Madrid coach, has taken both Malaga and Villarreal to the latter stages of the Champions League while earning plaudits for his style of play and man-management.
Soriano said: "I think the boxes are right. You know what we want.
"The analysis of the candidates goes beyond the results that we can see.
"Age is not relevant at this point, but with the kind of squad we have, we want a senior manager.
"We want a manager who knows about football but we want somebody who knows about man management and this is something we are convinced about - myself, the board, the owner - that it is impossible for us to win, win the Champions League, if we don't have a group that behaves like a family."