Kompany ended his 11-year stint at City in May 2019 but was not replaced last season, when City relinquished its English Premier League title in meek fashion to Liverpool.
Despite signing Nathan Ake for 40 million pounds ($46 million) during the offseason as a backup to left-sided center back Aymeric Laporte, City remained in the hunt for a right-sided center half to effectively replace Kompany.
John Stones and Eric Garcia played in that position in City’s two league games so far this season, but both players’ futures are uncertain. Garcia has been linked with a return to Barcelona, while Stones was largely frozen out of the team last season.
The 23-year-old Dias, a tall and strong defender comfortable with the ball at his feet, has played 19 times for Portugal. He has established himself as a regular with the national team after being a squad member at the 2018 World Cup in Russia.
Dias has come through the Benfica academy, joining its senior squad in 2015. He was captain for what could prove to be his final game for the team, against Moreirense on Saturday, and embraced his teammates and sporting director Rui Costa after the final whistle in a signal that he was about to leave.
Benfica said the transfers of Dias and Otamendi were yet to be completed, with contracts still to be signed and medical examinations to be taken.
City has spent heavily on center backs since 2014, bringing in Eliaquim Mangala from FC Porto that year for a reported 42 million pounds, Otamendi from Valencia for 32 million pounds in 2015, and Stones for an initial 47.5 million pounds in 2016.
Laporte joined from Athletic Bilbao for a then-club-record fee of 65 million euros ($80 million) in January 2018.