Iheanacho is one of the most highly-rated young players in Africa having played a starring role in Nigeria's Under-17 World Cup win last year.
Iheanacho was named player of the tournament, after which a number of European clubs showed an interest, but he opted for City.
He travelled to Manchester late last year to train with the club and has now agreed a deal, which will be finalised when he turns 18 later this year and he will officially move from the Taye Academy in his homeland.
James Iheanacho, the player's father told Nigerian radio station Brila FM: "The situation is that Kelechi hasn't turned 18 yet and until he does, he can't sign but what he has done is sign a pre-contract with Manchester City pending his 18th birthday."
City are understood to be looking into whether they can get a work permit for Iheanacho but, if not, then he would be loaned out until he would be eligible to play in England.