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City have been chasing Tottenham striker Kane all summer but a deal is looking unlikely.
The current Premier League champions are without a recognised starting striker after Sergio Aguero's departure - with Carragher having the perfect replacement.
He named PSG youngster Mbappe as someone City should be eying and explained in his Telegraph column: "City must have considered a Plan B in the event of Spurs refusing to sell Kane. There would be more value in trying to sign Kylian Mbappe for in excess of £100 million a year before his contract expires at PSG, for example."
Mbappe's contract with the Ligue 1 outfit is set to end next summer and it is believed he is ready to seek a new challenge.
That could change however, thanks to PSG securing Lionel Messi's signature earlier this month.
Carragher also touched on City deciding to smash the British transfer record for Jack Grealish.
While Grealish is a top talent, the Sky Sports pundit believes securing a striker was more important.
He continued: "City obviously had the funds to buy Kane for £150 million at the start of the summer but decided to match the £100 million clause for Jack Grealish.
"At the moment, it looks like they got their priorities wrong.
"Grealish is a fine player. He will do well at City. I understand why he wanted to move. What I cannot get my head around is why City did not attend to their more pressing needs first.
"Signing Grealish will not be the difference between City defending their title or finally winning the Champions League this season.
"Signing Kane, or a world-class striker capable of scoring between 20 or 30 goals this season, might be."
Kane's contract with Spurs doesn't expire until 2024 and chairman Daniel Levy is playing hardball over any transfer fee.
"As the supposed number one summer target, he should already have been paraded in his City shirt," Carragher remarked.
"It is difficult to understand how City imagined this would play out any differently than it has over the past two months.
"From the moment it became clear Kane would push for a transfer, and City were preparing their move, everyone in football foresaw the current state of affairs.
"Anything less than £150 million for the England captain is going to be met with an instant rebuke."
Featured Image Credit: The Overlap/YouTube & PA Images
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