The Premier League club have been linked with the 26-year-old for a number of months - with reports suggesting that they came close to signing the player in January.
In a statement to the Portuguese Securities Market Commission on Wednesday, the Primeira Liga club revealed they had reached an agreement with the English champions.
"FC Porto... hereby informs the market that it has reached an agreement with Manchester City for the permanent transfer of the professional sports player Fernando Reges, for the amount of €15,000,000," the statement read.
Fernando, who operates primarily as a defensive midfielder, began his career with Vila Nova in his native Brazil.
He then made the move to the Estadio do Dragao in 2007 and subsequently became a key figure for the club - winning a host of domestic silverware as well as the UEFA Europa League in 2011.
Fernando agreed a new three-year deal with the club in March, which would have kept him under contract until 2017.
However, he is now poised to complete a move away, with Porto team-mate Eliaquim Mangala - a reported long-term City target - potentially joining him as the French defender continues to be linked with a move to the Etihad Stadium.
