The striker's move to the Mestalla was confirmed as the transfer window slammed shut, with the Liga side to make the move permanent next summer.
The Spain international has joined Nuno Santos' side for the 2014-15 season, with the Liga club set to make the move permanent next summer.
Negredo's move looked to be in doubt as City fell back in the race to sign Radamel Falcao from Monaco. But as the transfer window slammed shut until January, Valencia confirmed that an agreement had been reached to bring the former Sevilla man back to his homeland.
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Negredo enjoyed a sensational run of form in the early part of his City career but entered a barren spell in front of goal in 2014 as he failed to score in his final 16 games for the club.
Manuel Pellegrini's side was initially believed to be chasing a deal to bring Falcao to the Etihad as it sanctioned Negredo's exit, but was ultimately willing to allow the 29-year-old to leave despite not adding the Monaco striker.
Negredo's arrival comes as Valencia announced the signing of Filipe Augusto from Rio Ave on loan, while Portugal international Helder Postiga has left on a one-year deal to join Deportivo.