The 24-year-old made 11 Premier League appearances last term, while his move to Steve Clarke's side has the option to become permanent at the end of the campaign
The 24-year-old, who signed for City last August, made just 11 Premier League appearances under Roberto Mancini last term.
Clarke is buoyed by the arrival of Sinclair and believes the winger bolsters his attacking options this season.
“Scott understands he needs to play football and it will be good to work with him again,” Clarke told the club's official website. “We’re delighted he feels this is the right club for him at this stage of his career.
“He is the type of player we were missing from the squad. He is a pure winger, who is quick, direct and scores goals – he has proven that over his career.
“He can play off the right or left and improves our attacking options. I know him well and he is a good person, who I know is 100 percent committed to our cause.
“He is frustrated he did not get the chances to play at Man City last season and hopefully he will take those frustrations out on Premier League defenders this season.”