City, in partnership with baseball giants New York Yankees, have acquired the rights to establish a new MLS franchise in New York city from 2015 in a deal believed to be worth 100million US dollars (£66million).
The new team will be known as New York City FC and could play in City's traditional sky blue colours.
The presence of the new club will allow City to increase their profile in the United States, create additional revenue streams and possibly facilitate the crossover of players.
It is the first time a European club has undertaken such a venture although it is not unique for MLS with Mexican club Chivas also running a side in the competition. City chief executive Ferran Soriano, speaking at the announcement of the deal at MLS headquarters in Manhattan, said: "This is about winning and developing a competitive team that will win.
"We have been working on this opportunity for nine intense months.
"The global expertise we have will help us establish a high-quality club here.
"There is obviously another side - the commercial side - to having a club here called New York City and the club back in the UK to be called Manchester City.
"We are very excited, this creates history and we are excited to start working on it.
"New York City will have an identity of its own. We will create a whole new organisation, starting today."
City have been in discussions to build a new stadium in the Queens borough of the city at Flushing Meadows Corona Park for some time.
This has not yet been finalised - there has also been some local opposition - and the team will have to play at a temporary location until a new venue is built.
City have a good reputation for their work in the community in Manchester and their new academy and training base, currently under construction adjacent to the Etihad Stadium, will help regenerate the Eastlands area.
They intend to take the same approach in New York.
Soriano said: "We are not looking for a place to play, we are looking for a home, so we need the local community to embrace us and be our family.
"We are taking it from there. We will continue these discussions, look for other options and we want to listen to everybody and find a place to build a stadium that is going to be a home for us."
Once up and running, New York City could offer fringe players based in Manchester the opportunity to gain valuable experience on loan in MLS. Likewise successful MLS players could move over to Manchester.
But Soriano was keen to point out this was not the purpose of the venture.
He said: "The purpose is to build a winning team in New York and for that, we will need players in New York.
"But it is only natural. We have lots of good players and lots of young players in England, a very big scouting network and some of the Manchester players may come here.
"But this isn't the objective and it is not why we are doing this."
Interestingly, it is also very much a City venture rather than a private initiative of owner Sheikh Mansour, as had previously been rumoured.
The tie in with the Yankees, baseball's most famous club, will bring considerable clout.
City will be the majority owner but with the Yankees playing an active role on the commercial side.
City are due to play a friendly against Chelsea at Yankee Stadium on Saturday in the second match of their post-season tour.
Yankees president Randy Levine said: "Obviously our brand is very well known - it's about winning, winning championships and we are here to lend our support to make sure that it happens.
"They will be running the soccer franchise, we know how to run baseball so we will stick to that. "Commercially we know our way around New York city, we know how to get things done here and it's very exciting.
"We only team up with people who we think are first rate. They fit into our overall plan."
MLS feel the time is right for expansion - City will become the competition's 20th club - having experienced big growth in attendances and viewing figures in the last five to six years.
They also wanted to boost profile in New York and establish a rivalry with the New Jersey-based Red Bulls.
MLS commissioner Don Garber said: "Our country is rapidly becoming a true soccer nation.
"Our league is trying to fuel that growth and the best way for us to do that is to take the lead as a professional organisation, to develop players here and abroad.
"The best way to do that is to have smart, committed partners - we have that with Manchester City and the Yankees."