The 15-year-old forward has agreed terms with City, and will sign a five-year deal in March on his 16th birthday.
City have persuaded Pozo to move to England, rather than continue his football education at the Santiago Bernabeu.
Pozo is also reported to have shunned offers from Arsenal and Liverpool to join City.
City have also taken the step of agreeing a compensation deal with Real and it is believed they will pay an initial €200,000 although reports in England claim the deal could eventually be worth £5million.
However, it is also claimed in Spain that there are clauses in the deal which will allow him to move back to Real in 2014 and 2015 for set amounts.
The Malaga-born youngster is expected to fly to England next week with his family to tie up the move.
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