Ivory Coast striker Bony moved to the Etihad Stadium from Swansea City last month, penning a four-and-a-half year contract.
The 26-year-old is yet to make his debut for Manuel Pellegrini's team due to his nation's run to the final of the Africa Cup of Nations, but his inclusion in City's squad for the latter stages of the Champions League was viewed as a formality.
Nevertheless, restrictions placed on City's UEFA squad size after the club fell foul of Financial Fair Play regulations last year meant an overseas player would have to make way for Bony.
Montenegro international Jovetic is the player to miss out. The forward appeared in five of City's six Group E matches, although he failed to score and was substituted at half-time on his only start in a 2-1 home defeat to CSKA Moscow.
City face Barcelona in the round of 16, hosting the Catalan giants on February 24 before travelling to Camp Nou for the second leg on March 18. Barcelona knocked out Pellegrini's men at the same stage of last season's Champions League.
Elsewhere, Real Madrid have added prodigious youngster Martin Odegaard to their squad ahead of the tie with Schalke.
The 16-year-old Norway international signed on a three-and-a-half year deal when he joined from Stromsgodet in January and he will become the youngest player ever to feature in the competition if boss Carlo Ancelotti selects him in the next round.
