Manchester City look set to lose out to Bayern Munich for young French talent Ousmane Dembele, a source close to the club has told ESPN FC.

Incoming Manchester City boss Pep Guardiola had identified Rennes winger Dembele as a target for when he takes over at the Etihad Stadium next season and had asked the club to make a move for the player.

Guardiola is planning to revamp the City squad when he takes over from Manuel Pellegrini in the summer and he sees Dembele as a star in the making.

Dembele is regarded as one of the best young talents in Europe after bursting onto the scene with Rennes this season.

The 18-year-old has scored 10 goals in 21 games and laid on five assists for Rennes so far this season to make him one of the hottest properties among Europe's elite and led France coach Didier Deschamps to reveal he could make a late run into the squad for Euro 2016.

Ousmane Dembele is being tracked by a host of Europe's top clubs after a string of eye-catching displays for Rennes. DAMIEN MEYER/AFP/Getty Images

City, Barcelona, Juventus and Monaco have all expressed an interest in Dembele, but a source has told ESPN FC that Bayern are in pole position to land the attacker.

Bayern have scouted Dembele extensively this season and, aware of the increased attention in the teenager, have firmed up their interest.

Bayern are hoping to strike an early deal to ward off their European rivals and are ready to loan Dembele back to Rennes next season as part of the deal.