The 30-year-old, who spent last season on loan at Barcelona, has penned a three-year deal with the Saudi Pro League title-holders.
Cancelo joined Man City in 2019 from Juventus and was a key player in his first three seasons at the club.
But he reportedly fell out with manager Pep Guardiola over his lack of playing time midway through the 2022-23 campaign and spent the rest of that season on loan at Bayern Munich.
Cancelo won three Premier League titles, the FA Cup and League Cup at the Etihad Stadium.
He also played six times in City's first victorious Champions League campaign in 2022-23.
Cancelo is Al-Hilal's first high-profile signing of the transfer window and joins Brazilian star Neymar and former Premier League players Kalidou Koulibaly, Ruben Neves and Aleksandar Mitrovic in Jorge Jesus' squad.
He has not played since Portugal's penalty shoot-out loss to France in the Euro 2024 quarter-finals last month.
