Southampton manager Russell Martin said: "Shea is a very talented, intelligent and mature young player with great potential to develop his game with us.
“He has been well schooled at Manchester City, coming through an elite Academy all the way to the first team. We’ve watched him closely and we’re confident he’s got the right attributes to help us in the way we’re going to play."
Shea Charles said: "I feel like the way the manager’s going to play will really suit me, and obviously some of the players that I know (from City) have done very well here last season in the Premier League, so there’s no reason why I can’t come in and do similar things.
"He (Russell Martin) called me the other night, explaining that it will be good for me with the possession-based football that he looks to play, and I just can’t wait.
"I feel like the main thing is promotion for this club, because we belong in the Premier League. I can’t wait to start pre-season and get into the Championship games."