The merger idea was floated in 1964 by the then-vice chairman of City, Frank Johnson, who was desperately looking for a way to help the struggling side survive.
This extraordinary revelation comes in a new book about City by football historian Gary James
In the modern game the idea of City and United merging seems about as likely as Israelis and Palestinians putting aside their differences.
But back in the 1960s things were very different. City had let United ground-share at Maine Road for years after the Second World War, with Old Trafford having been flattened by the Luftwaffe, and United continued to play European fixtures at City's ground for much of the 1950s when they did not have their own floodlights.
Yet despite the goodwill between the two clubs, the idea of a merger was still seen as a step too far.
"The idea was killed by both clubs before it ever became public," said James.
"Frank Johnson, who came up with the idea, often came up with crazy ideas.
"Another of his plans was to make the entire league regionalised into north and south.
"But City (under then manager George Poyser) were at a real low in their history at the time. In terms of league position, it wasn't as bad as 1998-99, but in terms of general morale, atmosphere and support it was by far the lowest point in the club's history.
"In the late Nineties, we still had over 30,000 going to games, and that meant the club still had a high profile. In 1964-65 we were in the second division, support had dropped to a low of less than 15,000, and general interest in the club had also dropped.
"I always believed in the Nineties that City would come back, because of the strength of the support, but in those days in the Sixties a lot of people didn't feel that way.
"At that time, a lot of the 'town' clubs like Bolton, Burnley and Blackpool, who had all been major powers, began to struggle, and clubs like Accrington Stanley and Bradford Park Avenue were dying.
"There was a feeling that this could happen to any club. In fact, all it needed at City was a plan and a vision, and to bring in the right manager."