The English club included the clause when they sold Luiz, 22, to Villa for £15m (€16.6m) last summer.
City will have to pay around £25m (€27.7m) to re-sign Luiz, who is scheduled to train with Villa on Wednesday.
But Pep Guardiola was left frustrated when Luiz was denied a work permit, which forced him to spend two seasons on loan at Girona.
After a slow start at Aston Villa, the dynamic midfielder became one of the highlights of Dean Smith’s side.
In total, he made 42 appearances in the 2019-20 season, scoring three goals.
Luiz has finally obtained a two-year work visa for England in recent months after having a provisional license beforehand.
He passed an English exam in June during the stoppage due to the Coronavirus, helping his cause.
And his future looks be back at the club that bet on his potential, Manchester City, who are poised to re-sign him.