The Red Devils recently emerged as surprise contenders to land the Chile international, who has been on the radar of neighbours City since a collapsed move last summer.
Sanchez has less than six months to run on his Emirates Stadium contract and is in line for a big payday if he lets his contract expire, with no transfer fee required for his signature.
City are said to be prepared to wait until the summer before making their approach for the free agent, but The Sun suggests that United boss Jose Mourinho is to pounce by offering the ex-Barcelona ace a huge pay packet, which he hopes will be enough to see off competition from the Citizens.
The report claims that Sanchez is to be offered £350,000-a-week wages at Old Trafford, plus a £25m signing-on fee, while Arsenal will receive £30m and agent Fernando Felicevich around £5m.
Mourinho hinted earlier this week that he is prepared to move for the 29-year-old in the remaining weeks of the transfer window, as he is keen to bring in some attacking firepower to make up the gap on league leaders City.