The Serbian left-back passed a medical to complete a move to the big-spending City, the club said on their official website.
"I have watched him a lot since then (2007) and so have the Manchester City scouts. His attacking capability is very good. He is fast and can shoot with power and accuracy," City's Italian coach Roberto Mancini said.
"He also has the ability to play in numerous positions and is very good in midfield. This is an additional benefit to the team.
"He has a fantastic international career ahead of him. I am looking forward to working with him."
Kolarov joins new signings David Silva, Yaya Toure, and Jerome Boateng at the Eastlands.
City, who finished fifth in the Premier League last season, open their new campaign against Tottenham Hotspur on August 14.
They will be eyeing a top-four finish to book a place in the elite European Champions League.