Dzeko moved to the Etihad Stadium from Wolfsburg four years ago for £27m and scored 72 goals in 187 appearances for the club. He signed a new four-year contract with City only last year.
Dzeko, however, only managed six goals last season and City have let him go after the Bosnian fell down the pecking order under Manuel Pellegrini.
The Chilean coach has already loaned out Stevan Jovetic to Inter Milan but has Sergio Agüero, Wilfried Bony plus new £49m signing Raheem Sterling who can also play up front.
City begin their Premier League campaign at West Brom on Monday evening.
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