Nolito, a Spain worldwide of 16 caps and six goals, joined City from Celta Vigo for £13.8m just 12 months ago but the Premier League side have cut their losses.
Following the arrival of Gabriel Jesus in the January transfer window, Noilto's game time was significantly reduced - five Premier League appearances in 2017 - and will be hoping to get his career back on track with this return to Spain.
The report claims that they will also try to sign former Manchester City forward Stevan Jovetic and Chelsea defender Kurt Zouma this summer.
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The transfer fee has been reported to be about €9 million (£7.9m), after City paid €18m for him a year ago.
"I'm insane to return to Spain, I'd like to leave Manchester City whether it's on loan or permanently, whichever way possible", he said. "I have several teams I'd prefer to join", Nolito said.
"Up until December I was playing and was happy, but after those four months I've hardly played".
The Montenegrin forward spent the second half of last season on loan from Inter Milan.