Laporte's buyout clause was confirmed at €65m (£57m) when he signed the terms in the summer of 2016, with Bilbao stating that the contracted amount has now been deposited.
It leaves Laporte, who was reported earlier on Monday to be travelling to Manchester, free to sign with City. He will become the club's record signing after surpassing the £55m paid to Wolfsburg for the signature of Kevin De Bruyne in 2015.
New Liverpool signing Virgil van Dijk (£75m) is the only defender in world football to have ever moved for a bigger fee, while City will now be responsible for four of the six most expensive defensive signings in history after previous big money moves for Benjamin Mendy, Kyle Walker and John Stones since 2016.
The arrival of Laporte, who is expected to put pen to paper on a long-term contract at the Etihad Stadium, could well signal the beginning of the end for City captain Vincent Kompany.
The Belgian, due to turn 32 years of age in April, has struggled with fitness for a number of seasons and made his latest comeback from injury in the FA Cup this weekend against Cardiff. Eliaquim Mangala may also be deemed surplus to requirements come summer.