A number of Championship clubs have been linked with a move for the 19-year-old during the current transfer window, with Preston beating the likes of West Bromwich Albion, Swansea City and Leeds United to his signature.
Nmecha is eligible to play for Germany, Nigeria and England and chose to represent the Three Lions.
He has been in City's academy for a decade and broke into their first-team squad in the last few months.
Nmecha was promoted to the senior squad at the start of last season after impressing at EDS level.
"We have signed one of the brightest forwards in the country at his age group", North End boss Alex Neil said.
He has played twice for Manchester City's first-team already in his career and is highly thought of by Pep Guardiola.
Nmecha will spend the 2018/19 campaign on loan to Preston in the second tier, to gain valuable first-team experience for Alex Neil's side.
"This season we can go a long way".
"I think it a huge compliment of what we are trying to do and hopefully this will be a mutually beneficial move for both parties". "I am here to develop and give the club the best I can".