Balotelli's future has been the subject of much speculation due to his fringe role this season as well as a training ground bust-up with Mancini last week.
Mancini, who has backed Balotelli throughout a long line of controversies, played down the confrontation last week. He also insisted he was prepared to give his fellow Italian "another 100 chances" at the club.
That has not stopped reports from suggesting AC Milan are willing to give Balotelli a way out of Eastlands in the January transfer window but Mancini was indignant when asked about the latest transfer speculation.
"No, it is not true. I am very, very happy (with Mario)," he said today.
Former club Inter Milan have waded into the equation, with sporting director Piero Ausilio claiming they have first refusal on Balotelli, who moved from the San Siro to City in August 2010.
"The right of first refusal is there," Ausilio told Italian magazine Panorama.
"If Inter decide to exercise it, it will be a choice that will be made if City should decide to sell him.
"Balotelli technically can fit alongside any attacker."
Balotelli had missed four games with a virus prior to his return as a substitute against Watford in the FA Cup last week.
He made a surprise appearance for City's Under-21s on Monday and scored two goals in a friendly against Blackburn, while the 22-year-old has also dyed his hair blond this week.
Asked if this was a fresh start for Balotelli, Mancini said: "Next question! No, I hope. He went with the under-21s because he needed a game.
"After 40 days without a game, he needed one game. He trained well and I hope this year will be different."