The 22-year-old Elias made his senior debut for Palmeiras last year and has made 96 appearances for the club, scoring nine goals and making 12 assists. He is yet to play for Brazil. This move paves the way for the sale of his countryman, Savinho, to Tottenham for £75m plus £10m.
Allan's arrival will clear the way for the sale of Savinho, who has informed Enzo Maresca he wishes to leave. However, City's manager said on Friday that the Egyptian had not done so. The money from Nico González's proposed sale may be used by Manchester City to make an official bid for Chelsea's Enzo Fernández.
Manchester City have so far made only one senior signing in the window, the £116m purchase of Elliot Anderson from Nottingham Forest. They are close to sealing the €95m (£81.4m) plus €5m deal for Ayyoub Bouaddi. The Lille midfielder is thought to have undergone his medical on Monday.
The next step for Manchester City is to complete the transfer of Ayyoub Bouaddi, with the midfielder's medical already underway.