Carlo Ancelotti on shortlist to replace City manager Manuel Pellegrini

Real Madrid's Carlo Ancelotti has moved into pole position for the Manchester City job after Pep Guardiola ruled himself out.

City manager Manuel Pellegrini is under mounting pressure with the club facing another early Champions League exit and their Premier League title also slipping away.

Bayern Munich boss Guardiola had been on their short-list, but has now publicly insisted he is staying with the German giants and will honour his contract until 2016.

That leaves the way open for ex-Chelsea manager Ancelotti if City bring down the axe on Pellegrini in the event he finishes the season empty-handed.

Ancelotti has a get-out clause in his contract at the Bernabeu and Europan champions Real have yet to offer him an extension to his current deal, which expires next year.

There is a growing belief ex-AC Milan and Paris Saint-Germain coach Ancelotti could leave if Real fail to win the Spanish title or European Cup this season.

He has also been left frustrated at not being able to strengthen the squad the way he wants.

Atletico Madrid boss Diego Simeone has been City's original No1 choice, but Spanish champions Atletico are hopeful of being able to keep him - and potentially tie him down to a new deal.

City's chief executive Ferran Soriano and director of football Txiki Begiristain have close relationships with Guardiola from their days together at Barcelona but it seems unlikely they will persuade him to move from Bayern.

Guardiola said on Tuesday: "Of course I am going to fulfil my contract here. I haven't had a contract offer [from another club] and I am not waiting for a contract offer from anyone else.

"I have very happy here. I am working for this wonderful club and that is the only thing I am thinking about at the moment.

"I could stay at Bayern for four, five or six years. It depends on what the club wants and my situation. But now it is not this that is important."

Those words appear to leave the way open for Ancelotti, who also has admirers after his three career triumphs in the Champions League - which is City's ultimate goal.