The full-back from Portugal is still the subject of a deal, but the plan calls for a first loan with a 70 million euro (£61.5 million) buy option in the summer.
The 28-year-old made 98 Premier League appearances since joining City from Juventus in 2019.
Under Pep Guardiola, he has won the EFL Cup and two league championships.
Due to his ability to slide inside and serve as a playmaker when City held the ball, Cancelo had previously been considered one of the essential players in Guardiola’s team.
He was selected for the last two seasons’ PFA Premier League team of the year based on his achievements.
Since the World Cup, he has only started three games, and his most recent two outings were in losses to Southampton and Manchester United.
The City boss is sure that he has enough defensive alternatives to replace the withdrawal of a player who is eager to travel to Bayern in order to continue playing at the top level thanks to the development of youngster Rico Lewis and Nathan Ake’s improved form.
After attempting to fend off a group of four invaders at his house in a “horrific heist” in December 2021, Cancelo sustained facial wounds.
In February 2022, he agreed to a brand-new five-year contract with the Premier League winners, extending his stay at Etihad Stadium through 2027.
Last summer, City sold Raheem Sterling to Chelsea for £50 million along with Oleksandr Zinchenko, Gabriel Jesus, and Oleksandr Zinchenko to Arsenal.
Analysis: Changes to the strategy lessened Cancelo’s influence
Pep Guardiola has always been open about the fact that he won’t keep a disgruntled player.
Joao Cancelo is dissatisfied with his limited playing time, and Guardiola has accepted an offer from Bayern. That is all there is to it.
The harsh reality is that Cancelo is one of many who has not performed at the necessary levels during a season in which City has failed to find the consistency and efficiency of prior seasons.
The advent of Erling Haaland caused some tactical adjustments, and Cancelo is no longer the same force he once was.
Additionally, Guardiola feels confidence in his alternatives as a result of the development of young Rico Lewis at right-back and Nathan Ake’s improved play, who provided the game-winning assist from left-back against Arsenal on Friday.
This move carries some risk because there are concerns about the health of John Stones, Aymeric Laporte, and Ruben Dias.
But Guardiola has guided City to four championships in the past five years, and by approving this deal, he has demonstrated that he is courageous enough to make choices that he feels would increase the club’s chances of future success.