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The deal with the Champions League finalists is for an initial loan with a £25.3m (30m euros) obligation to buy.
“For me it’s a dream come true,” said the 22-year-old, who joined City in 2020 but has played a game for the Premier League champions.
“Borussia Dortmund is a special club. Every child in Brazil knows how great this club is.
“I can’t wait to wear the BVB shirt for the first time and experience the power and emotions in this brilliant stadium.”
After moving to City, Couto was initially loaned to fellow City Football Group outfit Girona for a year, then spent two more campaigns with them following a year with Portuguese side Braga.
He helped the La Liga side qualify for this season’s Champions League.
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