The pre-season match in Croatia on Tuesday involving City's Elite Development squad was abandoned moments before the half-time interval when coach Patrick Vieira ordered his players off the pitch following the alleged incident.
French midfielder Fofana, 19, had been sent off for lashing out at Rijeka opponent Marko Marcius before the clash was cancelled with the Croatian team leading 1-0 in the 44th minute.
City - on a 10-day training camp in Novigrad - released a statement afterwards indicating Fofana had been racially abused by a Rijeka player.
"Manchester City's EDS U21 game with HNK Rijeka has today been cancelled due to an alleged incident of racial abuse toward the Club's young midfielder, Seko Fofana by a member of the opposing team," the statement read.
"Following an alleged incident in the latter stages of the first half of the game, being played in Novigrad, Croatia, a decision was taken by the management staff to withdraw the City team from the field of play and cancel the game.
"Club representatives in Croatia and in Manchester are liaising with officials, the match organisers and the Croatian Football Association to pursue this matter further."
Rijeka, who finished second in Croatia's top flight last season, also released a statement on Tuesday and said they were surprised by the sequence of events.
"Manchester City coach Patrick Vieira walked onto the pitch, discussed something with the referee and then, to the surprise of a well-filled stadium in Novigrad, pulled his team off the pitch," the statement said.
"What the reasons are only he knows."
