The 23-year-old becomes City’s fourth signing of the window, joining Abdukodir Khusanov, Vitor Reis, and Omar Marmoush.
Gonzalez, who started his career at Barcelona’s La Masia academy, made 37 first-team appearances before moving to Portugal.
“This is the perfect opportunity for me at this stage of my career,” he said.
“I am 23 and I want to test myself in England. There’s no better club than Manchester City for me to do that.
“Look at the squad they have here. It’s unbelievable, full of world-class players. There isn’t a footballer in the world who would not want to be part of this set-up.
“I know the reputation Pep has and I cannot wait to work with him. In fact, I am honoured he wants me to play in his team.
“I am truly excited. I just want to meet my teammates, and the staff here and then I want to play in front of the City fans!”
Director of Football Txiki Begiristain added: “Nico is a very talented young midfielder. He is an ideal acquisition for Manchester City.
“It was a difficult transfer to complete because his performances this season have been outstanding and he has been such an important part of what FC Porto are doing. We are really happy we have managed to get this done before the window closed.
“He is ready to help us in the second half of the season as we compete in the Premier League, Champions League, FA Cup and Club World Cup.”