Bruce is the first major signing of Trevor Francis, who replaced Barry Fry as Birming- ham manager earlier this month. The possibility of a coaching role at St Andrew's has apparently tempted Bruce to chose the lower division side over another season with the Double winners.
"It will be a terrible wrench leaving United," Bruce said. "But at this stage of my career the offer from Trevor Francis is too good to turn down."
Bruce, who made his United debut in 1987, helped guide the club to three championships in four seasons. However, he was left out of the squad for the FA Cup final victory over Liverpool. Alex Ferguson, the United manager, said: "We have had to concur with Steve's wishes. That is the very least we owe him. It gives him the chance to extend his career and it is a marvellous challenge for him."
United, meanwhile, have been seeded for next season's expanded European Champions' League but Rangers, the Scottish title holders, will have to qualify for the 24-club competition.
The assertion of Frank Clark, the Nottingham Forest manager, that Jason Lee's career had taken a downward spiral because of derision meted out by BBC 2's Fantasy Football League was itself roundly ridiculed.
The 25-year-old forward, whose distinctive dreadlocks and poor form have been a continuing source of amusement for the programme's hosts, Frank Skinner and David Baddiel, has been transfer-listed.
But Clark's claim that the pounds 200,000 signing from Southend has been victimised was roundly dismissed in a statement issued by the comedians' agents.
"Frank Clark is wrong to blame us for Jason Lee's decline," it read. "He bought the player in the first place and now is deciding to sell him. It is obviously convenient to blame us."
Kenny Jackett has become the Watford manager in a reshuffle at Vicarage Road that sees Graham Taylor, the former England manager who returned to the club last season, elevated to general manager.
Jackett, who made more than 400 appearances for Watford before a knee injury cut short his career six years ago, yesterday appointed Luther Blissett as his No 2. Last season the former team-mates shared the first team, reserves and youth coaching duties as the club were relegated from the First Division.