"The crutches are gone. He has started to work and hopefully he will start to run and then help us in the last games of the season," Guardiola told reporters on Friday.
City, who are third in the table, travel to sixth-placed Arsenal at the Emirates Stadium on Sunday in a vital game between sides chasing a top-four finish.
Arsenal have lost ground in the race to qualify for next season's Champion League after losing four of their last five league games, but Guardiola urged his side not to take the north London club for granted.
"When you lose a lot of games it is a more dangerous moment to face them. I would prefer Arsenal to be winning a lot," the Spaniard added.
"They are so professional, (Arsenal manager) Arsene (Wenger) is professional and the Arsenal players as well. They want to win every game, so I don't think it is a big problem. Everybody knows them. Arsenal is a top team."
City midfielder Kevin De Bruyne, defender Pablo Zabaleta and Sterling have recovered from minor knocks to be included in the squad.
(Reporting by Shravanth Vijayakumar in Bengaluru, editing by Ed Osmond)
