Manchester City included a sell-on clause in Alfie Harrison's deal with Newcastle United.
The youngster was sold for a nominal fee to Newcastle last week.
However, the Manchester Evening News says the deal includes a series of bonuses which could see the fee rise to 3.5m.
And the agreement includes a 40 per cent sell-on clause for City.
The 18 year-old midfielder said: "The size of the club and what it has got going for it is massive for me. It's got a huge, passionate fanbase and I'm looking to really push on with my career now.
"If I was a kid now, looking at me signing for Newcastle United, it's what dreams are made of. I'm really looking forward to what is coming and how I can progress in the coming years.
"I'm an effective player who can add goals and assists. I really like to create stuff but, on the other side, I'd also say I'm a very passionate player who always wants to win."