The 23-year-old was released by the Dragons before the June 30 deadline due to salary cap constraints and his signature was highly sought after.
While there had been rumours Kite would be headed to Canberra, Manly put them to bed by announcing his signing last night.
It follows the signing of former international forward Ben Kennedy earlier this month.
"To sign a Test forward of great standing and a current young NSW State of Origin forward inside a week is an indication that elite players see a big future in the Manly Sea Eagles,� said Manly Executive Director Paul Cummings.
"We have some of the best young talent in the NRL signed for lengthy periods - the arrival of Kennedy and Kite will accelerate their progress and Manly's return to its rightful position in the game.�
Kite, who will be at Manly until at least the end of the 2008 NRL season, says he enjoyed his time at the Dragons but had no choice but to leave when the salary cap took its toll on the club.
"It wasn't an easy decision - I have loved my time at St.George Illawarra and will give them everything I've got for the rest of the season,� Kite said.
"But I am very excited about the future at Manly and their professional approach in my dealings with them once I was allowed to test the market.�
The Dragons also lost hooker Mark Riddell to salary cap constraints yesterday, with the goal-kicker signing a three-year deal with Parramatta.