No financial details of the deal were disclosed, but British media reported that City paid 52 million pounds.
"I am absolutely delighted to be joining Manchester City," Mendy said on the club's website. "They are one of Europe's leading clubs and in Pep Guardiola they have a manager committed to playing attacking football.
"I am sure that over the next few years we will be successful."
Mendy began his career with Le Havre, who currently play in France's second tier. He moved to Marseille in 2013, where he made 101 appearances in three seasons and established himself as one of the best full-backs in France.
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He joined Monaco on a five-year deal last season, winning the Ligue 1 title in his sole season at the club, which also reached the Champions League semi-finals.
"Benjamin has all the qualities we are looking for in a full-back," City's director of football Txiki Begiristain said.
"For such a young player, he has a wealth of top-level experience. He is undoubtedly one of the world's best full-backs, our number one target in this position."
Mendy will join City, who are preparing for their second pre-season tour game against Real Madrid in Los Angeles.
(Reporting by Simon Jennings in Bengaluru; editing by Alexander Smith)
