The 59-year old will depart La Rosaleda for 'sporting reasons' and has now been backed in as odds-on favourite to replace the sacked Roberto Mancini at the Etihad Stadium.
"I'm going for sporting reasons."
He added: "We leave the club qualified for Europe with the mission accomplished but it is unfortunate that this project changed.
"We had a time with the club that was very rewarding. Everyone has the right to move on.
"Sunday (against Deportivo la Coruna) will be my last match at La Rosaleda and will be very exciting for me.
"I'm not leaving due to the matter of money but looking for a project that allows me to develop my profession conveniently.
"I am grateful to the directors of Malaga for trusting me but I think now the club must take another path."