It was suggested City had agreed a five-year deal for the star, with incoming manager Pep Guardiola eager to stamp his mark at the club in the transfer window.
But news of a move for Gundogan has bemused Dortmund.
“I only learnt about this myself from the newspapers,” Dortmund’s director of sport Michael Zorc said.
In a sarcastic tone, Zorc said: “It’s nice when you learn about something like this in this manner.
Gundogan has one year left to run on his present Dortmund deal.
He made a cameo appearance as he came off the bench for Dortmund’s Europa League quarter-final tie against Liverpool at Anfield on Thursday.
However, he couldn’t prevent his side losing 4-3 and crashing out of competition.
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