Mahrez was the subject of four failed bids from City in the January transfer window.
The Algerian winger becomes Pep Guardiola’s first signing of the summer and will put pen to paper on a five-year contract.
“I am so pleased to have joined City, a side playing great football under Pep Guardiola.
“Watching them from afar has been a pleasure. Pep is committed to playing attacking football, which is a perfect for me, and City’s performances last season were outstanding. They’re redefining the English game and I wanted to be a part of it.
“I think we can be successful over the coming years and I believe my own game can develop under Pep’s management,” Mahrez told City’s official website.