The football club, which currently tops the Barclays Premier League, will replace current sponsor Umbro with the American sportswear brand from the start of the 2013/14 season.
The tie-up will run until 2019.
It marks the end of a three year deal with Umbro and will see Nike assume responsibilities for designing matchday and training kits as well as other sports gear.
Nike’s logo will appear on the new kits, however Etihad Airways is the team’s main shirt sponsor, after signing a £400m 10-year deal last July.
The club’s intercity rivals Manchester United also have kit sponsorship deal with nike in place.
The Premier League estimated that the tournament’s title decider match, which was played earlier this week (30 April), between both teams attracted more than 650 million viewers in more than 190 countries.
The move is the latest phase of Manchester City’s bid to establish viable commercial streams ahead of the UEFA Financial Fair Play rules, which wil take effect in 2013.
Nike also sponsors Barcelona, Manchester United and Inter Milan, while Brazil, France and Holland can be counted among their international partners. From next season it will also produce the kits for Everton FC.