Mandzukic, 26, impressed for the Croats even though they were eliminated at the group stage of Euro 2012, scoring three goals in as many games.
He also bagged 12 Bundesliga goals in a campaign where Wolfsburg struggled initially, and with fellow Croat Ivica Olic having going the other way, the former Dinamo Zagreb forward could Munich-boun.
"At this point in time it is a fact that there are some clubs interested in signing Mario Mandzukic," Felix Magath told Deutsche Presse-Agentur. "Right now it is an open race.
"I am not preventing players from moving on. If there is definite interest, I have no problem with that, but, I do not want to get rid of him."
Mandzukic, who has 20 goals in 56 international appearances, added fuel to the rumours, saying Bayern would be his preferred destination.
"The truth is that I am negotiating with Bayern," he was quoted as telling Bild.
"It's a great club and of course I'd like to play there - who wouldn't? For the time being I'm holiday, so it's down to my representative to sort things out."