He joins from Chelsea and will link up with Pep Guardiola's squad in time for the upcoming FIFA Club World Cup.
Bettinelli, a reliable shot-stopper with vast Premier League and Championship experience, began his professional career at Fulham before spells with Middlesbrough and Chelsea. Though largely a backup at Stamford Bridge, his leadership and professionalism were widely praised.
At City, Bettinelli will provide valuable depth and competition for established goalkeepers Ederson and Stefan Ortega Moreno.
His arrival is seen as a strategic move to bolster the goalkeeping department.
Speaking after the announcement, sources close to the club highlighted Guardiola's appreciation for experienced squad members who can step in when needed and maintain high standards in training.
"It's an honour to sign for City," said Bettinelli.
"I have admired from afar what this Club have achieved since Pep Guardiola arrived and now I am excited to be a part of building on that success.
"I can't wait to work with Guardiola, Xabi Mancisidor and the excellent goalkeepers already here and see their methods up close.
"Hopefully I can contribute in training, the dressing room and on the pitch as we look to win more silverware over the next year."