The Belgium international spent two years as a Blues player, but barely featured for the London club before leaving to join Wolfsburg over the summer following a loan spell in Germany with Werder Bremen.
The 23-year-old impressed last term, and has built on his reputation further in recent months, with a return of three goals and ten assists in the Bundesliga already this season.
This form has alerted Manuel Pellegrini, who is desperate to bolster his midfield ranks in a bid to maintain his side’s title push.
Yaya Toure is set to jet off to the African Cup of Nations next month, and with Cote d’Ivoire expected to go far, his absence may be a long one.
De Bruyne is seen as both a quick fix and a long-term option and Pellegrini is not deterred by his £20m price tag.
A winger who is capable of playing in a central berth, the youngster was tipped for big things at Chelsea, but managed just three appearances for the Stamford Bridge giants in between loan spells at Genk and Werder Bremen.