The Bosnian striker has entered the final 12 months of his current deal at the Etihad Stadium.
City are eager to talk terms, though, after seeing Dzeko play a pivotal role in their 2013/14 Premier League title success.
The 28-year-old netted 26 times in all competitions last season, the first time in his three-and-a-half years in England that he has broken through the 20-goal barrier.
Dzeko has not always been a regular starter at City, but he is enjoying his time with the club and is confident an extension will be agreed in the near future.
He told kicker-Sportmagazin: “I am very happy in England. I am enjoying it.
“I am in talks about a new deal. I am expecting to sign on.
“I have been the subject of some enquiries, but I knew I wanted to stay on at Manchester City.”
Dzeko has also been discussing a possible return to former employers Wolfsburg at some stage in his career.
He admits such a move is unlikely, but is ruling nothing out.
He added: “Anything could happen.
“I had a great time at Wolfsburg and it is a club that I owe a lot. But a return to Wolfsburg is not realistic at the moment.”