"Santos will assume all of the player's contract terms, including wages and bonuses. Robinho will travel to Brazil on Sunday to begin his loan period," City said in a statement.
Robinho will earn substantially lower wages at the Brazilian club but will be paid extra money by sponsors.
"At the beginning I thought this (loan idea) didn't go beyond a distant dream but when I spoke to the player I realized that his will would be fundamental," Santos president Luis Alvaro de Oliveira Ribeiro said.
"The big difficulty was the financial operation despite Robinho being prepared to take a pay cut to play for Santos again. From then on, we set up a financial enterprise to make the (player's) signing viable," he told a news conference.
"Robinho will hand over his image and become an advertising model during the period of the contract with Santos. In exchange for that, there's a financial input to cover the demands of a great star. Santos will pay barely a small portion of the salary within our means.
"Robinho, with his charisma, his performance on the pitch and his image of an idol will attract better sponsors to Santos and all this at zero cost to the club.
"The possibility of an extension to the (loan) contract continues to be a dream but we believe that dreams can come true," Oliveira Ribeiro added.
He said Robinho would be officially unveiled at a big event next week and could make his debut in the "classico" against Sao Paulo in the Paulista state championship on February 7.
HAPPY OUTCOME
The 26-year-old Robinho joined big-spending City in 2008 for a British record transfer fee of 32.5 million pounds from Real Madrid but has struggled to hold down a first-team place.
"Robinho is someone who needs to be playing regularly and we wish him well for the period of his loan," said City manager Roberto Mancini on the club website.
Santos welcomed "King of the stepover" Robinho back on their website.
"It was a negotiation with a very happy ending for Santos. It's a great gift for the Fish's fans," Oliveira Ribeiro added using the Atlantic port city team's nickname.
Robinho, who left Santos for Real Madrid in 2005, won the Confederations Cup with Brazil last year but had feared a lack of first-team action could jeopardise his World Cup hopes.
He struggled to make an impression at City under former manager Mark Hughes but Italian Mancini, who joined the club in December, had said he was keen for him to stay.
When Robinho, whose full name is Robson de Souza, was 14, Santos great Pele, who at the time supervised his former club's youth scheme, said the boy would have a great future.
Robinho won the Brazilian championship twice with Santos and helped them reach the 2003 Libertadores Cup final. At Real Madrid he was part of a squad that won La Liga in 2007 and 2008.
With Brazil, Robinho won the Copa America in 2007 as the tournament's top scorer with six goals, the Confederations Cup twice and played at the 2006 World Cup in Germany.
