Santa Cruz told the club's website: "The owners want the club to be more successful. They want to break into the top four, and the fact that the fans are so passionate about everything to do with City was also a factor. I am very motivated to play for these fans.
"I know the kind of football Mark Hughes wants to play and the kind of character he is - he's a winner, he wants to make things happen and be successful.
"Those are always my thoughts as well, so knowing what he wants was a big factor in coming here, because I know the club is going in the right direction."
Hughes said that Santa Cruz would be a key addition to his squad. He added: "His ability in the air and his physical presence are qualities we've been missing, but he also has technical ability and good pace for a big man.
"He's a very good player and one I know well from our time at Blackburn."
The deal is City's second signing of the summer, following Gareth Barry's £12m move from Aston Villa.
After joining from Bundesliga side Bayern Munich for £3.8m in 2007, Santa Cruz went on to make 70 appearances for Rovers.
But he only played 16 times last season in a disjointed campaign, with a knee problem keeping him on the sidelines for the last two months.
Santa Cruz could make a swift return to Ewood Park, with City's first game of the new season at Blackburn.
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