Wagner failed to make a first-team appearance for Bayern as a youngster, but the 29-year-old has since become one of the top strikers in the Bundesliga, with 15 goals coming in 40 league appearances for Hoffenheim.
The Germany international is one of Nagelsmann's key men, but it appears that the two clubs could come to an agreement over a transfer in the coming weeks.
Nagelsmann told reporters: "It's right [about Wagner to Bayern], and we've known for longer than yesterday. We are aware of his interest [in a move]. We will make an announcement if there's something to announce. There are no grudges that he is interested, but there is sympathy.
"It's not my player, he belongs to the club. If the clubs reach an agreement, you try to compensate for things as a coach."