32-year-old Demichelis, who has been capped 37 times by Argentina, has penned a two-year deal with City and is reunited with Manuel Pellegrini who was his manager at both River Plate and Malaga.
Demichelis told City's website: "I am delighted to have joined City because I am still hungry for success and want to improve.
"I have been in Europe for 11 years now and this was a great chance for me to play in the Premier League with such a big club.
"I have lived in Europe for many years and I don't think there'll be any problems in adjusting to life here.
"Now I want to repay the manager's faith in me out on the pitch. I can't wait to get started."
Demichelis only left Malaga for Atletico Madrid in July and now moves swiftly on to Manchester for a reported £3.5million.
He also spent seven years with Bayern Munich where he won four Bundesliga titles and four German cup medals.