According to the New York Times, investigators for the European governing body have made a decision to push for at least a one-season ban from the competition, after a meeting at its Swiss headquarters two weeks ago.
This is because an ongoing investigation by UEFA into City's spending habits is reportedly likely to find that the Manchester club have misled authorities about their finances.
City were among a handful of teams targeted in media leaks towards the back end of past year, including other European heavyweights Bayern Munich and Paris Saint-Germain. "This can lead to the heaviest punishment: exclusion from the UEFA competitions".
"The accusation of financial irregularities are entirely false, and comprehensive proof of this fact has been provided to the CFCB IC".
According to Der Spiegel in November, City had breached FFP rules by €188million in that year. And 18-year-old midfielder Phil Foden is also set to play a bigger part of Guardiola's plans after making a big impact in City's title run-in by starting the final three Premier League games at the Etihad Stadium. There are eight members of the Uefa investigatory chamber of the semi-autonomous club financial control body, which oversees the monitoring of, among other things, Financial Fair Play.
In January, former Belgian Prime Minister Leterme told Sport and Strategy magazine in his homeland that City should face a competition ban, if claims the club topped up multi-million pound sponsorship deals with Abu Dhabi companies using the personal fortune of owner Sheikh Mansour were proved to be true.
However, even if the Gunners lose in Baku, City's potential suspension could mean they still secure Champions League qualification thanks to their league position.