City said Ederson will officially join the club on July 1, and he is expected to be Guardiola's first-choice goalkeeper ahead of Bravo.
"When I knew it was real, that they were really interested in me, I was very happy because it's good to see your work recognised", he told City's official website. Manchester City is a great club, the league they have here in England, they have awesome fans and they play splendid football. Those were important factors in making my decision.
The 23-year-old is set to compete with Claudio Bravo for the No. 1 spot after the Chile worldwide struggled in his first season following a move from Barcelona last August.
And now City, who made room for Ederson by offloading out-of-contract Willy Caballero this summer, have confirmed the Brazilian's arrival.
It has been suggested that Guardiola is keen to listen to offers for Bravo, despite the former Barcelona man claiming that he does not wish to leave Manchester City.
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Barcelona come in second at $3.64 billion, followed by Liga Santander and Champions League winners Real Madrid at $3.58 billion. With a new 61,000-seater stadium under construction, Tottenham Hotspur ($1.06 billion) rounds off the top 10.
Ederson had always been linked to the Premier League side, having impressed at Benfica in just his first full season as a regular starter.
City's Director of Football, Txiki Begiristain, added: "We are delighted to bring Ederson to Manchester City".
Ederson started his football career in 2008 at Brazilian club São Paulo FC with whom he played one season, before joining Benfica.
"He is young, has all the qualities you could want as a top-class goalkeeper and I think he'll fit in really well to our squad".
City failed to win a trophy in Guardiola's first season in charge.