City made the announcement Monday, minutes after current manager Manuel Pellegrini ended a news conference by saying he would be leaving the club at the end of the season.
City is already the richest club in English soccer, with the strongest squad of players and arguably the best academy in the country. Now, it adds one of the world's most decorated and admired coaches, who won 14 trophies in four seasons at Barcelona and has continued to bring in silverware at current club Bayern Munich.
Pellegrini said he knew "a month ago" that he was being replaced by Guardiola, who announced in December he'd be leaving Bayern at the end of the season.
"There has been a lot of speculation about things," Pellegrini said, "but they (the club) are not doing anything behind me."
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City said the club made the announcement "to remove the unnecessary burden of speculation."
City had been heavily linked with hiring Guardiola. Two of City's top executives -- Ferran Soriano and Txiki Beguiristain -- worked with Guardiola at Barcelona, where the former Spain midfielder made his name as a coach by guiding a team led by Lionel Messi to unprecedented success from 2008-12.
Pellegrini may yet go down as City's most successful manager -- he won the Premier League and League Cup in his first season in charge, in 2013, and is in contention for four trophies this season -- but has had to contend with speculation about Guardiola for the past two seasons.
City has long lived in the shadow of neighbor Manchester United, but has been transformed since being bought in 2008 by Sheikh Mansour bin Zayed bin Sultan Al Nahyan, a member of Abu Dhabi's ruling family.
That changed the landscape of English soccer. City has won two Premier League titles in the last four seasons, as well as the FA Cup and League Cup.
City, however, has failed to progress further than the last 16 of the Champions League in four campaigns in Europe's elite competition.