McAtee has moved to Forest for a fee of £30m.
The England U21 midfielder has signed a deal with Forest to 2030.
Upon signing, McAtee said: “I feel ready for a new challenge and the Club had a great season last year so I want to help build on that and show what I can do.
“I’m so happy to be here and really looking forward to getting started with my new teammates and I know the ambition of everyone associated with the Club which is something I want to be a part of.”
Forest Chief Football Officer, Ross Wilson, said: “It goes without saying that we’re absolutely delighted to welcome James to Nottingham Forest. He’s a player we’ve admired for a long time, and our conversations with Manchester City, James, his family and his representatives over the past month have been incredibly constructive.
“After captaining England to the U21 European Championship title, James took some time to reflect on his next step - and we’re thrilled he’s chosen Forest. We are proud to now have three extremely exciting young talents from the group that lifted the U21 EURO trophy with Elliot, Omari and now James.
“There was strong interest in James, but he showed a real determination to join us. Our players have been excited about the possibility of him arriving, and now we can officially welcome him into the group.”