A statement by Porto to the Portuguese Securities Market Commission (CMVM) confirmed that a deal had been struck between the two clubs.
The statement read: "FC Porto hereby informs the market that it has reached an agreement with Manchester City for the permanent transfer of professional footballer Fernando Reges for 15million euros."
City were heavily linked with a move for the 26-year-old defensive midfielder in January but a deal did not materialise.
Should a move be completed now, Fernando would become City's second signing of the summer after landing right-back Bacary Sagna on a free transfer from Arsenal.
Fernando would give City manager Manuel Pellegrini an extra midfield option in addition to Yaya Toure, Fernandinho and Javi Garcia.
With City restricted to a net spend of £49million this summer as punishment for breaching UEFA's Financial Fair Play regulations, such a deal could represent good value.
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