Trafford has signed a four-year contract at Turf Moor.
The 20-year-old recently played a pivotal role as England won the European U-21 Championship. Trafford saved a late penalty as the Young Lions beat Spain 1-0 in the final.
Trafford did not make a first team appearance for Manchester City but spent the last two seasons on loan in League One with Accrington Stanley and Bolton Wanderers.
He told the Burnley website: “I feel very happy to officially be a Burnley player. I was excited for it to all get done whilst the Euros was going on, I knew a lot about it and I was waiting to get back to make it all official really.
“I want to improve and learn as much as I can here and as a team. I just want to take it a day at a time and try and achieve as much as we can going forward.”
Burnley manager Vincent Kompany added: “We’ve signed an extremely talented young man. More than just a talent he’s a great character.”
“James is a very impressive, confident mature young man. Most people have seen what he’s achieved in his career so far and his level of talent.
“We’re looking forward to developing that even further, making him even better. He’s done so much already and what excites us is how far he can go.”
Trafford could make his Premier League debut against Manchester City next month when Burnley face the champions in their first game of the season.
