The 23-year-old failed to make his mark at the Etihad Stadium in two injury-plagued seasons after leaving Everton, and will now hope for a fresh start on Wearside.
No fee was announced by either club for a player capped three times by England, but reports put the figure around the £10million mark.
Rodwell was at one time viewed as one of the brightest young England hopes after making his debut for Everton at the age of 16 in 2007.
He became a regular for Everton, making 109 appearances before joining City for Â£12million in the summer of 2012 despite missing out on Euro 2012 due to a hamstring injury.
His career at the Etihad stalled however, not helped by further injury problems, and he made only seven Premier League starts during his time at City.
He will not be the first player to leave City in order to attempt to resurrect a career at Sunderland - winger Adam Johnson made the same switch in 2012 with notable success, while Joe Hart's understudy Costel Pantilimon has followed this summer.
However Johnson claimed last season it was almost impossible for players not belonging to the eight leading Premier League clubs to break into Roy Hodgson's England squad ahead of the World Cup.