Rumours of the Citizens' interest in the Germany international have been doing the rounds for a couple of weeks already, but this is the first time either party has confirmed the fact.
"Sane is a player of Schalke," Guardiola said after losing his first match in charge of City, a 1-0 loss to former club Bayern Munich.
"Of course we talk to him - Schalke knows we are interested, but at this moment we don't have many possibilities to get him."
However, the admission in no way confirms a transfer will ever take place, as Guardiola also revealed the two clubs' valuation of the 20-year-old winger are some way apart.
"There's a difference between City and Schalke and it's quite big, but I don't know what's going to happen in the coming weeks and months," the Spaniard added.
Guardiola was happy with what he saw from the young team he put out against Bayern, despite making a losing return to the Allianz Arena.
"I am so happy, we did many things we spoke about well and in the right moment - that's why we cannot forget which team we played," he said.
"In the second half we played with a little more intensity and I'm really satisfied with what we did because we've only been together for two weeks.
"Bayern Munich is always a difficult opponent but we have to grow and get better. I think we have to play games like against Bayern Munich in order to learn and develop more - to get better.
"We have many young players in the team and you've seen them here - all in all, I'm satisfied with what they've shown me."