The Premier League clubs are looking to sign the striker in a cut-price January deal, according to The People.
The 20-year-old is regarded as one of Spain’s hottest young talents and is also being linked with a move to Juventus.
Isco has four years left on his current contract at Malaga, but has a £16million buyout clause in his deal.
Malaga boss Manuel Pellegrini has admitted he expects Isco could leave the club.
He said: “He is a player who has a great future. Nobody knows what his limit is.”
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The start of the 2017-18 Premier League season is just around the corner and is shaping up to be one of the most competitive yet.
As always it is the so called “big clubs” that have splashed the most cash in the transfer window so far this summer. Manchester United or City? Arsenal or Tottenham? Who are the winners and losers of the transfer window so far?