The full-back is to spend the season at Barcelona on loan and is in line to make his debut against Osasuna on Sunday. Cancelo had not played for City competitively since January amid his loan to Bayern in the second half of last season.
The Germans opted against the chance to trigger his 61.5m buy-out clause despite scoring a goal and notching six assists during his short spell. The Portugal star had sealed the January move amid an apparent rift with Pep Guardiola.
It seems there has not been reconciliation, with Cancelo failing to feature in Citys matches prior to his switch to Spain. Barcelona had long been linked beforehand but their poor financial situation prevented them from making a full transfer.
And so Bayern made a late enquiry, according to Sky Germany, albeit to no avail. Cancelos loan deal does not contain an option to buy, the Manchester Evening News understands.