The 21-year-old Serbia international is out of favour at City under Manuel Pellegrini, having not made a Premier League appearance this season.
Horst??Heldt told Germany’s Sport Bild magazine: “We are negotiating back and forth, that’s how it goes. You get closer and closer and in this case we are no longer far apart from each other.
“I am optimistic that we will get this done in the coming days.”
Heldt added the deal would be “a loan with an option to buy”.
Nastasic and winger Scott Sinclair have both been linked with moves away from the Etihad this month but Pellegrini insisted on Friday afternoon they will only go if the right offers come in.
“They are working with us, Nastasic and Sinclair, without any problem,” he said.
“They are part of the squad. We will see if there are good offers for them and for the club. If not, they will work with us here.”
Nastasic joined City from Fiorentina in 2012, signed by former boss Roberto Mancini. He made 13 league appearances last season as City won the title, but his only outing this term has been in the Community Shield in August.
Schalke are coached by former Chelsea boss Roberto Di Matteo.