Fabrizio Ravanelli has opened talks with Coventry and is expected to undergo a medical at Highfield Road.
The Italian striker joined the Sky Blues for training on Monday, sparking speculation he was poised to sign.
At that stage City issued a denial that talks had been opened with the 34-year-old former Italian international but have now confirmed negotiations over a contract have started.
Coventry chief executive Graham Hover said: “Fabrizio has been training with us this week and we have been in talks with him but at this present moment in time nothing has been confirmed with regards to a deal.
“The club will not break its wage structure to bring Fabrizio to Highfield Road and therefore we will have to negotiate a deal which suits both parties.”
Ravanelli, who is based in the Midlands, has enjoyed previous spells in England with Middlesbrough and Derby, who released him last season at the end of his two-year contract.