The Manchester City and Manchester United target will leave Porto and join los Che in the summer on a five-year deal and delighted at joining the club's Argentine history
The 25-year-old, who will join the club in July, has been highly sought-after, with a number of European clubs interested in the Argentine's services, including Manchester United, Manchester City and Monaco.
Goal reported in November that City were stepping up their pursuit of Otamendi, sending scouts to Portugal to watch the player in action, while United lodged a late January bid.
"After playing for a club like Porto - a huge, prestigious club - it is an honour to join a club like Valencia for this next stage of my career," Otamendi told the official club website.
"Valencia are one of the most historic and attractive teams in Spain and in Europe, and I am very happy with this next step in my footballing life.
"I know that Argentinian players have been an important part of Valencia's history. To wear the same shirt as Mario Kempes, Roberto Ayala, Pablo Aimar and many more is a responsibility that I will take on with much joy and excitement.
The club's general sporting manager Francisco Rufete added: "We have a great squad and we are convinced that Nico Otamendi will help us to improve from next season onwards, because he is a world-class talent.
"He is a strategic incorporation for our project and we are fortunate that he has chosen Valencia out of the many clubs vying for his signature. The arrival of Otamendi is great news for all Valencianistas and for the future of our side."