Hargreaves, 31, was released by Manchester United last year after a series of injuries curtailed his playing time at Old Trafford, and City took a calculated gamble on the player who was highly influential for both club and country at his peak.
Now however, after making just four appearances for City this season and scoring one goal, Hargreaves is injured again and City are unlikely to offer him a new deal when his his current one-year contract ends in the summer.
"We took a gamble on Owen because he was such a fantastic player," the City manager said.
"We thought we could try to get him fit in two or three months and then he would be able to play. But it hasn't worked out quite like that.
"When you have a player who hasn't played for two years and he starts to train every day there are small problems all the time. Problems in the knees or the hamstrings. So Owen hasn't been able to play when we have needed him.
"He may play again this season but he is not ready now. I hope eventually he will be able to play all the time. He deserves to, because he is a really nice guy."
The Canadian-born player made his name with Bayern Munich between 2000 and 2007 before moving to United where he made only 27 league appearances in four seasons, although he was in the side who won the 2008 Champions League final against Chelsea in Moscow.
He also played 42 times for England.
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