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The Premier League champions have also been fined £25 million.
UEFA have confirmed the outcome following a hearing held by the organisation's Club Financial Control Body (CFCB) in January.
The investigation was launched after a series of emails and documents were published by German magazine Der Spiegel in November 2018.
The club said in a statement it will appeal the Uefa verdict to the Court of Arbitration for Sport.
The club have made no secret of their desire to win European football's top prize, the Champions League, for the first time and manager Pep Guardiola admitted past year that his tenure is likely to be judged on whether he succeeds in the competition or not, despite having already won two league crowns.
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The club, while admitting they were not surprised by the sanction, have revealed their intention to appeal the decision to the Court of Arbitration for Sport.
The club say they are "disappointed but not surprised" by the announcement.
In their statement, they also ask for impartial and independent bodies to "consider the comprehensive body of irrefutable evidence in support of [their] position".
"In December 2018, the Uefa chief investigator publicly previewed the outcome and sanction he meant to be delivered to Manchester City before any investigation had even begun", it read. UEFA found that the club had seriously misled the continent's governing body and had broken the rule set down by Financial Fair Play.
Manchester City goes on to claim that UEFA were biased in their judgment, as the case was "initiated by UEFA, prosecuted by UEFA and judged by UEFA." .
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