The Manchester City centre-back, who was voted Scotland’s Young Player of the Year after a season-long loan at Celtic last term, turned down a number of offers to move to Istanbul.
His representative told Sky Sports News HQ Denayer had offers from England, France, Italy, Spain and Germany, but chose a move to Galatasaray.
The 20-year-old Belgian international is understood to have picked Galatasaray because they can offer him Champions League football this season.
The deal still is yet to be rubber stamped by Manchester City but the club have announced that their youngest ever goalscorer Marcos Lopes has left the club to join Monaco.
Lopes scored on his City debut in January 2013 in a League Cup game at Watford, just nine days after his 17th birthday.
Half an hour before Manchester City announced Lopes’ departure manager Manuel Pellegrini told reporters the youngster was going out on loan because he still had a future at the club.
Pellegrini said: “Marcos is still a player here for Manchester City. We will see his future in the next hours. I think Marcos needs to plays more in another club. He is a very good player.
“I am sure in the future he will be part of our club but for this year he must continue trying to play as much football as he can. Here he has a lot of competition with David and Samir so it is better for him to go on loan.”
The Brazil-born Portuguese midfielder – now aged 20 – spent last season on loan in France with Lille.
Meanwhile, Spanish second division side SD Ponferradina have announced that City have signed striker 23-year-old striker Ruben Sobrino in a deal worth up to £350,000.
The former Real Madrid youngster, who is expected to head straight out on loan, will cost City an initial fee of £200,000, with another £150, 000 potentially due in add-ons.