The Malaga midfielder has three years left on his current deal, but looks set to be sold this summer.
City are set to appoint his current boss Manuel Pellegrini as their coach, and it has been widely reported that he wants Isco to come with him.
Isco is happy to consider City, but Real are set to join the battle for his signature - which has seemingly given the 21-year-old something to think about.
"My future nobody knows. Pellegrini is my footballing father, who gives me confidence - so you have to think about (Manchester) City and look at it," he is quoted by AS.
"And Madrid? There is that, so we see what happens."
- Isco's performances lit up last season's UEFA Champions League. Adam Bate looks at why the Malaga midfielder has attracted the attention of the world's biggest clubs.