Manchester City have cooled their interest in Fred, which could pave the way for rivals Manchester United to sign the Shakhtar Donetsk midfielder.
City had appeared in pole position to land Fred this summer after being unable to complete a deal for the Brazilian in January.
But the chances of Fred, 25, joining the Premier League leaders are understood to have receded and there is a possibility he could now join United instead.
With Michael Carrick retiring at the end of the season and Marouane Fellaini uncertain to stay with his contract expiring in June, United manager Jose Mourinho is in the market for at least one midfielder this summer.
Asked about Fred’s future on Tuesday, Sergei Palkin, the Shakhtar chief executive, confirmed the £40 million-rated midfielder would leave the Ukrainian club this summer and said he expected he would move to Manchester.
“Fred will leave this summer,” Palkin told Corriere dello Sport. “If not to Manchester City, then to Manchester United. He is ready for the best championships. In addition to being very good, Fred is very professional."
City had appeared favourites to sign Alexis Sanchez only for the Chile striker to join United after the league leaders balked at the cost of the deal and it remains to be seen if Fred also ends up in the red half of Manchester over the blue.
City have not ended their interest in Fred, and are aware of his disappointment that a deal did not materialise in January, but they are now exploring other options, with manager Pep Guardiola eager to sign competition for Fernandinho in defensive midfield. Julian Weigl, of Borussia Dortmund, has been scouted extensively.
Fred told ESPN Brazil that City made an offer for him in January and that the possibility of moving to the Etihad “still exists”.
But he also said he would be “happy” to join United and has set his sights on a move to the Premier League.
“City are a great team, I would be happy to play there... or at Manchester United as well, at Chelsea, Arsenal, clubs of great tradition in Europe and England,” he said. “It is the best league in the world, I have no doubt, and I believe that my football would evolve.”