The England international has signed a four-year contract after the two clubs agreed to an undisclosed fee.
O'Neill has been on Johnson's trail for several weeks after it became apparent that his days at the Etihad Stadium were drawing to a close.
Johnson's arrival comes just hours after Wolves striker Steven Fletcher signed from Wolves on a four-year deal for an undisclosed fee.
"Adding quality players to the squad has been our main aim this summer and Adam certainly fits that bill," O'Neill said. "He has terrific ability, great delivery and I'm sure he is a player who will excite our fans. I couldn't be more delighted to have him at the football club."
Johnson, 25, is a product of Middlesbrough's Academy and has appeared in 12 games for England. However, he missed out on a trip to Euro 2012 and will hope his latest move could help to revive his international career.
Johnson played 96 times for first club Middlesbrough, scoring 13 goals, before he moved on to City in 2010. But after 73 games, which produced 11 goals, he has now moved to Sunderland.
Fletcher, 25, signed a four-year contract at the Stadium of Light and will be available for the Black Cats' Premier League game against Reading Saturday.
"It has been no secret that we needed to strengthen our attacking options and Steven has a proven track record of scoring goals," O'Neill told the club's website.
Fletcher and Johnson's transfers represent Sunderland's third and fourth signing of the summer following the arrival of Carlos Cuellar from Aston Villa and Louis Saha from Tottenham.
"I'm delighted and relieved," Fletcher told SAFCTV. "It's taken a while but I'm glad it's finally done. When I come to the training ground and see things like this, it obviously shows how big the club is. ...
"It's very positive, the signings (O'Neill's) brought in and the squad he's already got as well. I watched training yesterday and watched a bit today and the boys are looking very sharp. I'm excited."
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