Palmer was part of the England side which won the European Under-21 Championship earlier this summer, and is a product of the City academy.

"I'm excited to get started and it feels great to sign," he said.

"I've joined Chelsea because the project here sounds good and because of the platform I will have to try to showcase my talents.

"It is a young and hungry squad and, hopefully, we can do something special."

Palmer scored in both City's Uefa Super Cup win over Sevilla and the Community Shield defeat by Arsenal.

City manager Pep Guardiola had previously said that Palmer would not be allowed to leave on loan. West Ham had been interested in signing him earlier this summer but that was thought to be a loan approach.

"Cole arrives with the experience of winning the Premier League and Champions League and adds further quality and versatility to our attacking unit," said Chelsea co-sporting directors Laurence Stewart and Paul Winstanley.

"He has showcased his talent and potential in the most challenging environments and delivered on the international stage for England at the European Under-21 Championships.

"He is undoubtedly ready for this next step and we are delighted it will be with Chelsea."