Dolan will pen a one-year deal with the Bantams once his Middlesbrough contract expires at the end of June. Dolan's deal with City also includes the option to extend it by a further season.
Bantams boss Phil Parkinson originally tried to sign Dolan permanently in the final hours of the January transfer window but a deal couldn't be completed and the midfielder instead moved to the Coral Windows Stadium on loan.
The loan deal was struck, however, with the understanding that a full time move to the Coral Windows Stadium would be in the offing for Dolan come the summer.
The 21 year-old made eleven appearances for City between February and April during the 2013/2014 campaign.