This will mean forward Jovetic will have 12 months left on his contract when he returns to the Etihad, with Inter having the option to buy after the two years at a knock-down price.
Montenegro international Jovetic joined City from Fiorentina for ??22m in July 2013 but has failed to secure a regular first-team place with the Premier League club during two injury-hit years in England.
Jovetic, 25, who began his career with Partizan Belgrade, has started only 11 league games for City and has made a further 19 appearances from the bench, scoring eight goals.
He has now been deemed surplus to requirements by City manager Manuel Pellegrini and is set to return to Serie A with former City boss Roberto Mancini at Inter.
Mancini said earlier in the week: “We really need an attacker because we only have two players up front at the moment.
“I already tried to sign Jovetic in my last season with Manchester City but he arrived when I was gone. He can play as a focal point or as a support striker but could also feature on the wings.”