The English club was found guilty of breaking Financial Fair Play regulations. City have also been fined £25 million by UEFA.
City, who will appeal to the Court of Arbitration for Sport, is in risk of losing manager Pep Guardiola.
Here we analyze the same.
Why Pep's job is under scrutiny at City?
City, who have somewhat conceded the Premier League title to Liverpool, have seen Guardiola be in speculation of late surrounding his job.
Reports stated that City want to win the Champions League and a loss against Real Madrid in the round of 16 could see Pep's job come under scrutiny.
This is despite the Spaniard winning several titles at City.
Post City's UCL ban, Pep to consider future: Report
Pep was determined to stay at City and excel further. There were even talks of him extending his contract beyond 2021.
However, the latest ban on City has changed things.
According to a report in The Telegraph, the former Barcelona manager will consider his future as manager of City in the summer.
A source claimed that Pep is shocked and will evaluate his plans.
Director could sack me upon failing to beat Madrid: Pep
"If we don't beat them (Real Madrid), then the chairman will come, or the sporting director, and say 'It's not good enough, we want the Champions League, I'm going to sack you'. Then 'OK, thank you, it was a pleasure.'," said Pep recently.
'Pep will not decide now what he's going to do'
The source claimed Pep will be calm as of now and decide on his future later on.
"It's stay calm and carry on for now," the source said. "Pep will not decide now what he's going to do. He will keep calm and decide what to do in future. Nobody expected this. City punished harshly. We are genuinely shocked by this punishment."
Pep has been highly successful at City
Pep has been highly successful at City since joining in 2016. He has a win percentage of 71.8 across competitions. Out of 213 matches, he has helped City win a total of 153. In terms of trophies, he has won seven trophies with the club.