The Uruguay international has joined the Andalusians for the remainder of the season, with a view to making the deal permanent at the end of the campaign.
The Andalusian side has an option to make the deal permanent if he impresses at La Rosaleda, with the Uruguay international well down the pecking order at Parc des Princes.
PSG manager Carlo Ancelotti has praised the “great professionalism” of the 32-year-old ahead of his switch to La Liga, with the player failing to make a first team appearance for the club this season.
“Diego has set an example,” Ancelotti told PSG’s official website.
“I want to emphasize that he was very professional. This is a good lesson for the whole group because he worked every day with great professionalism.”
Manuel Pellegrini’s side is currently fifth in the Primera Division after taking 32 points from 20 games, with Lugano's arrival set to boost its strength in depth with the player available for both domestic and European competition.
The move could also be bad news for U.S. international Oguchi Onyewu, who could see his already-limited playing time reduced with Lugano's arrival.