City, who have won the past four Premier League titles, said they are planning a “fitting tribute” before the end of the season.
“Manchester City will bid an emotional farewell to Kevin de Bruyne this summer when his contract expires, bringing an end to a glittering 10-year period at the club,” the club said.
“The Belgian, a global icon of the game, has played 413 matches for City.
“During that period, he has scored 106 times, making him the first City midfielder since Colin Bell to reach a century of goals.
“The club and all of our fans will now take the time to deliver a fitting tribute and farewell to one of the greatest players to ever play in the Premier League.”
The Belgium captain moved to City from Bundesliga club Wolfsburg in 2015 for £55m.
Manager Guardiola joined City a year later and helped develop De Bruyne, who had played in wide and attacking roles, into a central midfielder.
De Bruyne played a huge part as City enjoyed a dazzling period of success, culminating in the club’s first Champions League triumph two seasons ago in Istanbul, where they beat Inter Milan in the final.
But De Bruyne has started to struggle with injury in recent years. He missed almost five months of last season as City won their fourth consecutive Premier League title, playing just 26 games in all competitions.
More recently, he paused contract negotiations while recovering from a thigh problem sustained in September.
The former Chelsea player said he was “open to everything” last summer after being linked with a move to Saudi Arabia.
It appears that De Bruyne could play for City in the group stage of this summer’s Club World Cup, but as it stands he would not be eligible for the knockout stage as his contract expires at the end of June.
Guardiola says it is up to the player to decide whether to sign a short extension that covers the rest of the tournament and then leave.
World governing body Fifa has also tweaked its registration rules to effectively mean clubs can sign players solely for the duration of the tournament.
De Bruyne began his professional career with Belgian side Genk before signing for Chelsea in January 2012 for about £7m.
He made just nine appearances for the Blues and spent a season on loan at Werder Bremen before moving to Wolfsburg in 2013.
The midfielder has also made 109 appearances for Belgium, appearing at three European Championships and three World Cups, finishing third at the 2018 global tournament in Russia, when the Belgians beat England 2-0 in the play-off.
