The 25-year-old forward, who played part of last season on loan with La Liga side Real Betis, will come in to help fill the gap left by the sale of Roberto Soldado to Tottenham Hotspur.
"Pabon will be a Valencia player as we have deposited his buy-out clause of $10 million (£6.38m) ," Valencia president Amadeo Salvo told a news conference.
"In his contract, it literally says if a club pays $10 million, they (Monterrey) will let him go and they will put up no type of opposition.
"Now they say the $10 million was a net figure, but it doesn't state this anywhere. We will take it to (world football's governing body) FIFA if necessary, and they will rule in our favour.
"That would be inconvenient though as it would string the process out for another two or three weeks."
Valencia are struggling with crippling debts which have forced them into selling their leading players each summer.
Salvo said for the first time Valencia had used a third-party investment fund, Doyen, who had put up half the money to help finance the operation.
New coach Miroslav Djukic, whose side scraped an opening day 1-0 home win over Malaga in La Liga on Saturday, could yet see further changes in his squad before the end of the transfer window.
France defender Aly Cissokho has completed a loan move to Liverpool, goalkeeper Vicente Guaita is reportedly being followed by Arsenal and France defender Jeremy Mathieu hinted on Tuesday he was considering his future.