The team, to be known as the New York City Football Club, will be the 20th Major League Soccer franchise and expects to begin competing in 2015, assuming it can find a stadium to play in.
The announcement on Tuesday by Major League Soccer confirmed speculation that City would spend about $100 million to buy the expansion franchise.
Manchester City will be the majority owner of the new club, while the New York Yankees will own about a quarter of the team.
“New York is a legendary sports town, as well as a thriving global city with a rapidly expanding soccer fan base,” said Ferran Soriano, chief executive of Manchester City Football Club.
“We are thrilled to contribute to the energy and growth of New York City Soccer. In the Yankees, we have found the absolute best partner for developing a world-class sports organization and a winning team that will carry the New York City Football Club name with pride.”
Initially the team may play its inaugural season at Yankee Stadium. After that, the team hopes to play in a new stadium in Flushing Meadows-Corona Park that the owners of Manchester City would build.
The project, while backed by Mayor Michael R. Bloomberg, has alarmed parks and community activists, who object to heavily used parkland being given to a for-profit foreign-owned team essentially free.