The English club’s parent company, the City Football Group, has been in talks for Rosa, 17, a highly regarded defensive midfielder.
And negotiations have been successful with only bureaucratic questions and signatures needed to make it official.
City will pay an immediate €5m for the player, part now and part in January 2021. Of this 70% will go to Gremio and 30% to Vitória, his previous club.
A bonus, with an undisclosed target, will add €4m to the price. And more could follow taking the deal up to a potential €24m.
If Diego is registered in the Premier League, Gremio will receive €12m. If he completes 10 games for City, a further €3m will be paid.
Diego will sign a five-year deal with City, but will immediately be loaned out for experience.
Spain or Italy loan
His first loan will more than likely to be another City Football Group club, Girona, or an Italian Serie A side.
As he turns 18 on October 12, Diego will wait until the end of the season to travel to Europe.
Gremio turned down the Old Lady and started negotiations to renew Diego’s contract. The intention was to keep him and promote him to the first team.
At the time, the parties had agreed an extension until 2024, but struggled to settle on salary and bonuses.
With no renewal in place, Gremio have now agreed to sell their young talent to Manchester City.