The American side will retain her National Women Soccer League rights as part of the deal.
"With all the talent in the FAWSL, I know that each game will present a new challenge and the opportunity to grow both as a player and as a person in England is going to be amazing, alongside having the chance to play Champions League football too," she said in a statement.
"Sam [Mewis] and Rose [Lavelle] have been saying nothing but brilliant things about the club and hearing them speak so highly about the facilities, the staff and the players as well as their experience of a new technical and tactical challenge is something that was really appealing to me.
"I just can't wait to get over and help the team in whatever way I can and be successful on the field."
The centre-half joins City after spending four seasons with North Carolina Courage. During her time there she was named in the leagues Best XI three times and was voted the NWSL's Defender of the Year in 2017.
Dahlkemper has played 62 times for the USWNT and won numerous trophies with them including the 2019 World Cup and the SheBelieves Cup in 2018 and 2020.
"She is a very talented defender who has been successful both domestically and internationally -- with her desire and hunger for victory, we know she'll fit into our team ethos perfectly," City head coach Gareth Taylor said in a statement.
"We're really looking forward to working with her over the coming seasons."