The Bosnian striker has struggled to establish himself in Roberto Mancini's first-team plans at City since arriving in 2011, with many of his appearances coming off the bench.
He is, however, the reigning Premier League champions' top goalscorer this season with 13 in all competitions.
After spending a successful four years with Wolfsburg between 2007-11 ahead of his City move, Dzeko has been tipped for a return to Germany at the end of the season.
Dortmund were thought to be keen amid speculation they could lose star striker Robert Lewandowski to the likes of Manchester United or Bayern Munich.
But Dortmund boss Klopp insists that is not the case, telling SID: "This is total nonsense and not funny anymore."
Dzeko joined City for a reported £27million two years ago after scoring 85 goals during his time in the Bundesliga and Klopp admits the 26-year-old, who is contracted at City until 2014, is out of Dortmund's price range.
He added: "Dzeko is a good player but he is sadly out of our possibilities."