Akanji, who began his career with FC Basel, links up with former Dortmund team-mate Erling Haaland following his move to City earlier this summer.
He is the fifth signing Guardiola has made during this transfer window as City look to win a third successive Premier League title and a first Champions League trophy.
City’s director of football Txiki Begiristain said: “Manuel has plenty of experience playing at the top level of European football and we are confident he will be a valuable addition to our squad.
“We have been impressed with his performances during his time at Dortmund, where he has developed into a very good defender and one who is ready to perform in both the Premier League and Champions League.
“He has everything we want in a centre-back. He is strong, quick, comfortable in possession, has an excellent passing range and he will complement the other defenders in this team and our style of play.”
Meanwhile, French midfielder Claudio Gomes, 22, has left to join Italian Serie B club Palermo.
He made three appearances for City, and has had loan spells at PSV Eindhoven and Barnsley.
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