The Daily Mail says City released the winger after they discovered he had trained with the Spanish giants while on a family holiday.
City's staff had concerns and, even though they liked the player, decided against keeping him in their academy.
United signed the 10-year-old and, just days after his 17th birthday earlier this month, he agreed his first professional contract — said to be one of the biggest ever for a player of his age.
Barcelona had again made their interest known, as had Paris Saint-Germain.
His lucrative deal was followed by a first-team debut against hometown club Newcastle during Sunday's 3-1 win at Old Trafford, making him United's second youngest player in their Premier League history.