The Daily Star says United were battling Barcelona for the German's signature.
But Barca were yesterday slapped with a transfer ban preventing them buying players in the next TWO transfer windows.
Dortmund have confirmed Gundogan, who has just over a year left on his current deal, a new contract.
But despite their offer, it's understood the German wants out.
Gundogan is valued at around £25m but that will decrease the closer his contract comes to expiring.