The ownership group will pay a US$100 million franchise fee.

New York City has been without a top professional soccer team since the demise in the mid-1980s of the old Cosmos, who featured soccer greats like Brazil's Pele and Germany's Franz Beckenbauer.

While the New York Red Bulls are based in Harrison, New Jersey, MLS has long coveted a chance to get inside the five boroughs of the city itself.

"This is another big day for soccer in America," MLS commissioner Don Garber said. "We have worked for quite some time on trying to finalise a deal to bring the 20th MLS team to New York.

"Two of the biggest, most prestigious and clearly most respected sports organisations in the world are joining together to own this team," he added.

MLS has steadily grown since its formation in 1996 with successful, well-supported teams in cities such as Los Angeles and Seattle. But it has failed to attract large television audiences and the league hopes a New York team will change that.

Garber said MLS viewed a top-flight team in New York City itself as a defining moment for the league.

"This is a big market and represents over 19 million people," he said. "I think it will be transformational for MLS and for soccer in America.

"This country is rapidly becoming a very powerful and passionate soccer nation and it is our view that bringing together these two organisations will allow us to continue that tremendous momentum and bring it arguably to the most important city in the entire world," he added.

Manchester City, who won the Premier League in the 2011-12 season before finishing second to local rivals Manchester United this year, hope the Yankees will allow them to tap into their expertise in connecting with sport fans in New York.

"This is the best of both worlds - we believe we know how to manage a soccer club and the Yankees are a top sports organisation in the world and are true New Yorkers," Manchester City chief executive Ferran Soriano said. "We have a long-term plan for soccer in New York and there couldn't be a better partner."

While City have been working on the details of an MLS franchise for nine months, Yankees president Randy Levine said his organisation only joined the process "very, very recently".

"We are really excited. George Steinbrenner, the boss, and the Steinbrenner family, [owners] Hal and Hank Steinbrenner, have long been soccer fans," Levine said. "This is a phenomenal opportunity for us, in our home market, to partner with Manchester City, one of the great organisations in the world."

The new team will play at a temporary home in 2015 while efforts to find and build a new stadium are completed and Levine said Yankee Stadium was one option in the meantime.

Sheikh Mansour's wealth and the Yankees local contacts should help in the construction of a new stadium.

MLS has already begun discussions with the New York City authorities about the possibility of building a new stadium in Flushing Meadows Corona Park in Queens but other options will also now be looked at.

"I don't think there have been any setbacks [with Flushing Meadows] and I think clearly that is an option," Levine said.

"We just got into this and we are going to sit down with our partners and the commissioner and get the lay of the land and review and see what is the best alternative. This is just to see what are the best available options."

As well as the Red Bulls in New Jersey, the other professional team in the New York area are the re-formed Cosmos, who will join the second tier North American Soccer League later this year.

Retired former England midfielder David Beckham, who played for Los Angeles Galaxy, is in talks with MLS regarding an option he has to create a new MLS team, but his deal with the league explicitly ruled out New York as a location for such an "expansion franchise".

Soriano said Beckham "was never considered" for a role in the new club.