The investigation was announced by UEFA on Thursday.
UEFA announced on Thursday evening that the Investigatory Chamber of the independent UEFA Club Financial Control Body had launched a formal investigation into Manchester City over potential Financial Fair Play breaches.
While UEFA are yet to state which exact period of time their investigation will focus on, they confirmed that the investigation "will focus on several alleged violations of FFP that were recently made public in various media outlets".
It is believed that the Premier League side face a potential Champions League ban should they be found guilty.
If City are found guilty it would result in their second FFP-related punishment, after they received a fine of £49 million and a transfer cap which limited them to a net spend of the same amount in 2014.
In a complex ruling, City were also forced to agree to a series of maximum total losses in 2014 and 2015.
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A statement on the European football governing body's website said: "The Investigatory Chamber of the independent UEFA Club Financial Control Body has today opened a formal investigation into Manchester City FC for potential breaches of Financial Fair Play (FFP) regulations.
"The investigation will focus on several alleged violations of FFP that were recently made public in various media outlets.
"UEFA will make no further comments on the matter while the investigation is ongoing."
