The Colombian forward has been radar of Amakhosi since last season after helping the Brazilians win the 2016 Caf Champions League.
His contract with Sundowns was set to expire at the end of the current campaign and the Tshwane giants have decided to sell him to their Gauteng rivals.
Chiefs, who are under the guidance of Steve Komphela, have been hunting for a reliable goalscorer and Castro's arrival will beef up their striking department.
Castro has scored 15 goals in 57 appearances for Sundowns in all competitions.
He joined the Tshwane giants in 2015 following a spell with Bolivian side Universitario de Sucre.
Amakhosi made the announcement on their official Twitter page on Saturday: