Manchester City are set to lose highly rated teenager Brahim Diaz, with a new contract offered to him likely to remain unsigned, sources have told ESPN FC.

The 19-year-old's deal runs until the end of the season and he will be able to speak to other clubs from January if the issue remains unresolved.

Real Madrid have been scouting Spain under-21 international Brahim while Borussia Dortmund are keen to bring in more young talent from the Premier League following the success of his former City teammate Jadon Sancho.

Brahim has made just two appearances this season -- in the Community Shield and the Carabao Cup victory over League One side Oxford United -- and sources have told ESPN FC there is frustration at a lack of game time.

City boss Pep Guardiola is an admirer of the former Malaga youth player, but he has to oust Raheem Sterling, Leroy Sane, Riyad Mahrez and Bernardo Silva to get an opportunity.

Brahim, who impressed in a lively 55-minute display against Oxford before being taken off injured, has not been named in the squad for any of City's Premier League or Champions League matches this season.

ESPN FC has been told he decided against joining City's Spanish sister club Girona in the summer in a bid to try to force his way into the first team.

A number of top European sides appear certain to be interested if he becomes available for a relatively small amount of compensation.

His loss would also be a setback to City's desire to bring through their own players with only England U21 midfielder Phil Foden close to becoming a first-team regular.