The deal includes a sell-on clause and a buy-back option for City, which will allow them to reacquire McAtee in the future if he performs well during his time at the City Ground.
McAtee is believed to have been seeking a move away from City this summer, as he was likely to face limited playing time. Forest's signing of McAtee would be their second major transfer move of the summer, following a reported agreement to sign Omari Hutchinson.