Sane, 22, signed for City from Schalke in 2016 for a fee of £37 million.
The Germany international impressed in his first Premier League season, and made the PFA shortlist for the best young talent in 2016-17.
But he has gone one better this season, beating team-mates Ederson and Raheem Sterling to take the award.
Sane has made 28 appearances to date in the league, scoring nine goals to help City stroll to the title with five games to spare.
In all competitions the winger has scored 13 times in 45 games, proving a valuable option for City across the forward line as Pep Guardiola's men took the Premier League by storm.
A total of six players were shortlisted for the PFA award, which has been presented annually since 1974 to the best talent aged 23 or under.
As well as the City trio Tottenham's Harry Kane was in consideration, but his 37 goals in all competitions were not enough to earn him the prize he previously lifted in 2014-15.
Kane finished second in the voting to Sane, with the German's team-mate Sterling finishing third.
Sane's win cuts a run of three straight seasons where a Spurs star has received the award, after Dele Alli was named Young Player of the Year for two consecutive years in 2015-16 and 2016-17.
Sessegnon makes his own piece of history, as the 17-year-old became the first player from outside the English top flight to be nominated for Young Player of the Year.