Spaniard Arteta, who also played for Rangers, Real Sociedad and Everton, left Arsenal at the end of last season after five years at the Emirates Stadium.
"I've enjoyed an amazing five years at Arsenal and it's been an honour and a privilege to captain such a great club," the 34-year-old told the City website.
"I've been lucky enough to work under some amazing coaches during my career and I am now looking forward to the challenge ahead at Manchester City," he added.
"The opportunity to join Pep Guardiola and his team was an amazing opportunity for me and I am incredibly excited for the future."
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(Reporting by Ed Osmond; editing by Martyn Herman)
