The Premier League new boys had previously smashed their transfer record to bring in Andreas Cornelius and then England defender Steven Caulker from Tottenham Hotspur.
A new benchmark has now been set, subject to Medel securing a work permit, after the 26-year-old passed a medical on Saturday morning.
Bluebirds boss Malky Mackay is delighted to have secured the services of Medel, who played for Chile at the 2010 World Cup in South Africa.
"We're delighted to have secured the services of Gary - a tenacious and intelligent international midfielder," Mackay told the club's official website.
"Having had two seasons of regular football in La Liga - with 60 odd international caps to his name and three appearances at a World Cup - his experience will be an invaluable asset to our squad.
"He's played in a number of Boca v River Plate derbies in Argentina - one of the world's biggest derby matches - and I've no doubt that his background and pedigree will complement our midfield group in the Barclays Premier League."
Medel played for Sevilla against Manchester United on Friday night in Rio Ferdinand's testimonial game at Old Trafford.
He was then in attendance for Cardiff's home friendly against Athletic Bilbao on Saturday before his signing was announced, with reports in Spain suggesting the fee is in the region of €13million (£11.2m).
Medel started his career with Universidad Catolica before moving to Boca Juniors in 2009 and then Sevilla in 2011.
He will join up with his country on Sunday ahead of a friendly against Iraq in Denmark on Wednesday, before returning to a Cardiff squad boasting other new signings in the shape of Caulker, John Brayford, Cornelius and Simon Moore.