Arsenal and Liverpool made inquiries to Real Madrid about the availability of Isco over the summer, which were rebuffed by Carlo Ancelotti.
Isco has become a key part of Real Madrid's Champions League defense over the past few weeks.
Both clubs are interested in a £40 million bid in January for Isco.
Manchester City tried to sign Isco after hiring Manuel Pellegrini in 2013, but were beat out by Real Madrid. City figures to pursue Isco again along with their English rivals.