The Croatia international had attracted reported interest from Real Madrid and Bayern Munich, despite still having two years remaining on his previous agreement. His new deal also contains an option for an additional 12 months.
Gvardiol arrived from RB Leipzig in 2023 in a transfer worth 77 million pounds and has since become a key figure in City's defence.
Across 122 appearances, he has featured both in central defence and at left-back, helping the club secure the Premier League title in 2024.
"As soon as I knew City wanted to renew my contract, I felt straight away it was what I wanted," said the 24-year-old.
"The City fans have been unbelievable with me from day one, and the club provide absolutely everything for players. It's the best club in the world to be at."
The defender's latest contract follows a difficult campaign in which he spent more than four months on the sidelines after suffering a broken leg. He returned to action in May and is now looking to build on that comeback.
Having also represented Croatia at the World Cup, Gvardiol will now focus on cementing his place under new Manchester City manager Enzo Maresca as the club prepares for the upcoming season.
Jack Grealish's future at Manchester City remains uncertain after the England midfielder was left out of Enzo Maresca's squad for the club's pre-season tour of Hong Kong and South Korea.
Savinho could be set for a fresh start, with the Manchester City winger open to a switch to Tottenham as discussions over a possible transfer continue during the current window.
Manchester City midfielder Rodri is facing a race against time to be fit for the start of the new Premier League season after undergoing minor back surgery.
Joao Pedro scored a stunning nine-minute hat-trick as Chelsea fought back to beat Western Sydney Wanderers 6-4 in an entertaining pre-season friendly, handing new head coach Xabi Alonso a winning start.
