The 28-year-old, who has been at Villa since joining as a trainee, signed a five-year contract, City said in a statement on their website.
Barry was close to moving to Liverpool a year ago but the clubs could not agree a fee and the deal eventually fell through amid acrimonious exchanges between the player and manager Martin O'Neill.
In total contrast, Tuesday's deal was done in a matter of hours following Villa's lunchtime announcement that their captain was in talks with City.
"Gareth is widely acknowledged as one of the top midfielders in the Premier League and that is a recommendation in itself," City manager Mark Hughes told the website.
"When players of his quality become available then you have to be in the market for them.
"With Gareth we get the experience of someone who has played week-in, week-out in the hardest league in the world. He plays at a level that has an impact on the game and we are thrilled that he is joining us.
"I like players that have the sort of flexibility that enables you to change your tactics if you need during a game, and Gareth has that. He also has a range of passing that I'm keen to introduce to the team, and he has got great delivery at sets plays as well. He will bring a lot to City."
Barry said: "It didn't take much persuasion from Mark Hughes, they are heading in the direction I want to go.
"There is great potential here, and I'm sure there will be a few more additions to the squad this summer."
Predominantly a left-sided midfielder, Barry has also impressed in a more central role and is a favourite of England coach Fabio Capello.
He is currently with Capello's squad preparing for Saturday's World Cup qualifying match in Kazakhstan and next week's home game against Andorra when he will expect to add to his tally of 29 caps.
His signing could be the first of many at City in the close-season as manager Mark Hughes looks to use the millions of the club's Arab owners to build a squad to improve upon the team's 10th-place finish.
Hughes, who last year paid a British record 32 million pounds to Real Madrid for Brazil striker Robinho, added: "I was looking to get a number of deals done as soon as possible and we have had a great start with Gareth joining us.
"I hope we can conclude some more so that when we come back for pre-season training we have everybody fit and well and set for a successful campaign."
NEWS: Barry keen on summer switch to Arsenal
BLOG: Loyalty not the issue in Barry move to Liverpool
NEWS: Merson: Barry key to Liverpool league glory
VILLA FANS! Check FourFourTwo.com’s ever-expandinginterviews archivefor more stuff to read:
