No firm date has been set for negotiations to begin, but sources have told ESPN that City are keen to resolve the issue before Sterling enters the final year of his existing deal in June.
Sterling has a contract at the Etihad Stadium until 2023 and talks over an extension were halted while the 27-year-old made sure he was part of Pep Guardiola's long-term plans.
The England international lost his place in Guardiola's team towards the end of last season but has rediscovered his best form this term, scoring nine goals in 27 games in all competitions.
He was named the Premier League's Player of the Month for December after scoring five goals and claiming one assist in five games as City opened up a significant lead at the top of the table.
Sources told ESPN that Sterling's spell out of the team made him consider a loan move away from City in January, but there is growing expectation he will now stay at the Etihad.
However, Barcelona, Paris Saint-Germain and Real Madrid remain interested in potential moves either this summer or in 2023, and Sterling remains open to the possibility of playing abroad before the end of his career.
Sterling is into the final 18 months of his contract but both player and club are said to be "relaxed" about the situation.
After scoring 79 goals in three seasons between 2017 and 2020, Sterling managed 14 in 49 games last season.
After winning back his place, he has scored eight goals since the start of November to re-establish himself as a key player for Guardiola.
His form has helped City open up a nine-point lead at the top of the Premier League table as Guardiola's team look to win their fourth title in five years.