Bernardo Silva scored two of his seven goals for Manchester City last season in their second-leg semi-final victory over Real Madrid in the Champions League
The Portugal midfielder's previous deal was due to run out in 2025.
Silva, 29, was linked with Barcelona over the past two summers, and there has also been reported interest from Paris St-Germain and Al-Hilal.
"I've had six incredible years at Manchester City and I'm delighted to extend my time here," Silva said.
"Winning the Treble last season was extremely special and it's exciting to be part of a squad where there is such a hunger and passion.
"Success makes you want even more, and this club gives me that opportunity to keep on winning. I love the manager, my team-mates and the fans and hope we can share even more great memories in the coming years."
City boss Pep Guardiola lost captain Ilkay Gundogan to Barcelona earlier this summer, while Riyad Mahrez moved to Al-Ahli in Saudi Arabia.
Defender Aymeric Laporte has also hinted at his imminent departure after posting a farewell video to the club's fans on Instagram.
Laporte has reportedly agreed to join Saudi Arabian club Al-Nassr after five and a half years in the Premier League.
Guardiola has added to his midfield during this transfer window, with Croatia's Mateo Kovacic joining from Chelsea, while City have also agreed a deal to sign Rennes' Belgium winger Jeremy Doku for £55.4m.
Silva has been involved in all five Premier League title successes at City under Guardiola since he joined the club in May 2017, and the Etihad boss last year described Silva as "irreplaceable" amid speculation linking him with a move to Barca.
Silva proved his worth last season by scoring seven goals and providing eight assists in 55 appearances, helping City win the Treble of Premier League, Champions League and FA Cup titles.
And with Kevin de Bruyne side-lined for up to four months after undergoing hamstring surgery, Guardiola will be happy to have retained the services of one of his most creative midfielders.
City's director of football Txiki Begiristain has tipped Silva to play a key role as City attempt to win four Premier League titles in a row.
He added: "Bernardo has been exceptional during his time at the Etihad, so we're delighted that he has signed a contract extension.
"His quality and technical ability is fantastic - and alongside his hard work and professionalism he has become one of the best players in the world.
"Bernardo was so important in our Treble-winning season and we are sure he can help deliver even more trophies in the next few years."
-- Courtesy of Borneo Bulletin