Although there is no agreement as yet, City boss Pep Guardiola is known to be keen to strengthen his options on the right.
City, who also have £45m England right-back Kyle Walker in their squad, are expected to pay a fee in addition to 28-year-old Danilo joining the reigning Serie A champions.
Cancelo has also played further forward as well as at left-back, the sort of versatility that Guardiola loves to have in his squad.
The 25-year-old joined Juventus from Valencia for £35m in 2018 after spending a season on loan at Inter Milan.
He was part of the Portugal squad that won the Nations League earlier this summer, although he did not play in the semi-finals or the final.
As for Danilo, the £26.5m signing, has made just 22 league starts for city, the last of which came against Cardiff on April 3.
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