The Citizens signed Couto for around €6m (£5.1m) from Brazilian club Coritiba in 2020 after identifying the right-back as a potential future star, but he has now departed having never made a single appearance for Pep Guardiola's side.
Couto was initially loaned out to Portuguese outfit Braga in between two successful loan spells at Spanish sister club Girona, where he made a total of 95 first-team appearances in all competitions.
The 22-year-old provided 10 assists in 34 La Liga matches for Girona last season as they surprised many by securing a top-four finish and subsequently qualifying for the Champions League.
Man City opted against integrating Couto into their first-team squad over the summer, and the four-cap Brazil international agreed to join Dortmund on an initial loan deal with an obligation to buy for a reported €30m (£25m).
Couto was ultimately unable to break into City's senior side due to the presence of long-serving right-back Kyle Walker and rising academy star Rico Lewis.
Couto leaves Man City, joins Dortmund permanently
It was initially thought that Dortmund's obligation to buy would be activated in the summer of 2025, but it now appears that the German club have opted to secure the permanent services of Couto earlier than expected.
According to journalist Fabrizio Romano, Couto has now 'formally left' Man City on a permanent deal, as BVB have triggered the €30m package to sign the defender.
Couto has made three starts and three substitute appearances for Dortmund across all competitions so far this season since joining the club, including four Bundesliga outings and two more in the Champions League.
Speaking about his move to Dortmund in August, Couto said: "For me it's a dream come true. Borussia Dortmund is a special club. Every child in Brazil knows how great this club is, knows the fans, and is fascinated by the Yellow Wall."
Couto's permanent departure represents another smart transaction from Man City, who have made around £20m profit on the defender and have increased their earnings from player sales since the start of the summer to a figure in excess of £170m.
A large chunk of that has come from the club-record sale of Julian Alvarez to Atletico Madrid for £82m, while the likes of Joao Cancelo, Sergio Gomez, Taylor Harwood-Bellis and Liam Delap were also sold over the summer.