The Uruguay international has joined on a five-year contract from Sporting Lisbon.
Paris Saint Germain have paid a reported €60m to beat Chelsea to the signing of the 22-year-old defensive midfielder.
Ugarte spent two seasons with Sporting Lisbon after joining from Famalicao in the summer of 2021.
A statement by the French champions read: "Paris Saint-Germain are delighted to welcome Manuel Ugarte into the first team squad for the start of the 2023/24 season. The Uruguay international, who will wear the number 4, has signed a five-year contract through to 30 June, 2028.
"After coming through the CA Fenix academy in Montevideo, the Uruguayan capital and his home town, Manuel Ugarte made his first-team debut in December 2016 aged just 15 years and eight months.
"Over four seasons, the young midfielder accumulated experience before moving to Europe to join Portuguese side FC Famalicão at the end of 2020.
"Seven months, 27 games and one goal against Rio Ave FC were enough to convince Sporting CP to sign one of the most promising defensive midfielders in the world.
"In August 2021, he played his first game for Sporting just a few weeks before making his senior international debut against Bolivia (4-2 win, 6 September 2021).
"Last winter, Manuel Ugarte was among the 26 players called up by coach Diego Alonso for the 2022 FIFA World Cup in Qatar. He currently has eight caps for Uruguay"
Ugarte himself said: "I am sincerely very happy to be able to take this big step in my career, in such a big club, said Manuel Ugarte. I’m going to give my all for Paris Saint-Germain."
PSG have already signed Milan Skriniar and Marco Asensio on free transfers from Inter Milan and Real Madrid respectively.
