The 21-year-old midfielder’s move is subject to the provision of a work permit, something that prevented him from making a single competitive appearance for Premier League champions City.
Newly promoted Villa, however, are said to be confident authorities will approve their application.
A Brazil youth international, Douglas Luiz spent the past two seasons on loan at Spanish side Girona, featuring 38 times in LaLiga.
Villa boss Dean Smith said: “Douglas is an extremely talented young player with an outstanding pedigree who I am sure will fit nicely into our style and system of play.”
The former Vasco da Gama player becomes Villa’s 10th signing of the close season.
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