A stellar performer at last year's World Cup, where she scored the second goal in a 2-0 victory over Netherlands in the final, Lavelle is the latest eye-catching addition to Gareth Taylor's squad.
The 25-year-old has played for the Boston Breakers and Washington Spirit in the top-tier NWSL and she follows fellow USA midfielder Sam Mewis in joining City this month.
"I'm so excited to join Manchester City and I can't wait to play alongside some really talented players," Lavelle said. "I'm looking forward to the opportunity of playing in England and competing in the Champions League.
“I've heard amazing things about the club and it just felt like a really good fit overall. I want to challenge myself and feel that Manchester City is the perfect environment to do so and hopefully, I'll find some success along the way."
Lavelle's status in the game was confirmed by the acclaim for her World Cup performances, where she won the Bronze Ball, with the Golden Ball going to USA team-mate Megan Rapinoe and Silver Ball won by Lucy Bronze.
England defender Bronze is reportedly returning to City for a second spell with the club in the new season, having spent three years in France with all-conquering Lyon.
City boss Taylor said of the deal for Lavelle: "Her endless accolades for both club and country are proof of what a talent she is and she's exactly the kind of player we want here at City, with her ambitions and desire for success matching our own."