Both Manchester clubs have been linked with signing the Frenchman, despite Lyon issuing a strong statement earlier this month insisting Dembele would not be sold.
However, the Daily Mailreports that scouts from United and City were among those watching Lyon’s 2-1 win over Bordeaux, in which Dembele scored the winner.
The report says Lyon are exploring two signings in attack that could allow the Frenchman to move on.
Premier League rivals Newcastle and West Ham are also said to have sent scouts to watch Dembele.
Meanwhile, City and United will reportedly also do battle for Aston Villa’s Jack Grealish.
United have been linked with the Villa captain for some time, and now The Metroreport the midfielder is a new target for City after their 6-1 win at Villa Park on Sunday.
Despite the result, Grealish was fouled eight times by City as he tried to pull Villa back into the game – more than in any other game this season. Pep Guardiola had praised the attacking midfielder before the meeting.
The reportclaims United are planning to test Villa’s resolve by bidding for the midfielder at the end of the season, but might now face competition from City.