The move takes Manchester City's overall summer outlay to a Premier League record for a single transfer window, eclipsing the £415million Liverpool spent last year, according to the club.
Fernandez, who joined Chelsea from Benfica in 2023 for a then-British record £107million, has signed a five-year deal at the Etihad Stadium, with the fee matching the amount Liverpool paid Newcastle for Alexander Isak on deadline day 12 months ago.
The 25-year-old, who has played in two World Cup finals for Argentina and won major trophies in multiple countries, said he had been drawn by City's winning culture.
"Manchester City are the most successful club in England in recent times," Fernandez said. "Every player wants to be part of a club like this because everyone knows how well-run City are. I could not be happier to be here, and I am ready for the challenge of helping City continue winning trophies.
"This is a club built for success. If you look across the squad, City have quality in every area. I want to learn from my new teammates and become a better player.
"I pride myself on continually improving my game. Anyone who's worked with me will know how hard I train every single day and how much I put into matches. I give absolutely everything and I can promise Manchester City that will continue now I'm here.
"I want to thank Hugo, Enzo, Khaldoon and everyone at City who has made this deal possible. I want to take the faith shown in me and repay it as soon as possible."
Director of Football Hugo Viana said the club had moved to secure a proven winner.
"At Manchester City, we are always looking to bring in world-class players and Enzo fits the bill," Viana said. "He is a complete midfielder: technically gifted, hardworking, tenacious and a goalscorer. He is adept at playing different styles of football. He is comfortable playing a possession-based game, and he can play on the counter effectively, too.
"To have played in two World Cup finals and won major trophies in multiple countries at just 25 says everything you need to know about his mentality, professionalism and technical quality. We are delighted to bring him here and feel very strongly he will improve our team."
The negotiations moved quickly over the final 24 hours of the window, with the move reuniting Fernandez with head coach Enzo Maresca, who previously worked with the midfielder during his time at Stamford Bridge. Despite City's spending, the club have also recouped close to £300million in player sales this summer, offsetting a substantial portion of their outlay across the window.