The new deal will earn the 46-year-old a reported £22m and keep him at the Etihad Stadium until 2017.
The Italian is into the last 18 months of his current contract after he joined the club in 2009.
City beat local rivals Manchester United 6-1 last weekend to go five points clear at the top of the Premier League table.
Restore Data
| Team | P | W | D | L | F | A | GD | PTS | |
| 1 | Liverpool | 15 | 11 | 3 | 1 | 31 | 13 | 18 | 36 |
| 2 | Chelsea | 15 | 9 | 4 | 2 | 35 | 18 | 17 | 31 |
| 3 | Arsenal | 16 | 8 | 6 | 2 | 29 | 15 | 14 | 30 |
| 4 | Nottingham ForestNott'm Forest | 16 | 8 | 4 | 4 | 21 | 19 | 2 | 28 |
| 5 | Manchester CityMan City | 15 | 8 | 3 | 4 | 27 | 21 | 6 | 27 |
| 6 | Aston Villa | 16 | 7 | 4 | 5 | 24 | 25 | -1 | 25 |
| 7 | Brighton & Hove AlbionBrighton | 15 | 6 | 6 | 3 | 25 | 22 | 3 | 24 |
| 8 | Bournemouth | 15 | 7 | 3 | 5 | 23 | 20 | 3 | 24 |
| 9 | Fulham | 16 | 6 | 6 | 4 | 24 | 22 | 2 | 24 |
| 10 | Brentford | 15 | 7 | 2 | 6 | 31 | 28 | 3 | 23 |
| 11 | Newcastle UnitedNewcastle | 16 | 6 | 5 | 5 | 23 | 21 | 2 | 23 |
| 12 | Tottenham HotspurSpurs | 15 | 6 | 2 | 7 | 31 | 19 | 12 | 20 |
| 13 | Manchester UnitedMan Utd | 15 | 5 | 4 | 6 | 19 | 18 | 1 | 19 |
| 14 | West Ham UnitedWest Ham | 15 | 5 | 3 | 7 | 20 | 28 | -8 | 18 |
| 15 | Everton | 15 | 3 | 6 | 6 | 14 | 21 | -7 | 15 |
| 16 | Leicester CityLeicester | 16 | 3 | 5 | 8 | 21 | 34 | -13 | 14 |
| 17 | Crystal Palace | 15 | 2 | 7 | 6 | 14 | 20 | -6 | 13 |
| 18 | Ipswich TownIpswich | 16 | 2 | 6 | 8 | 16 | 28 | -12 | 12 |
| 19 | Wolverhampton WanderersWolves | 16 | 2 | 3 | 11 | 24 | 40 | -16 | 9 |
| 20 | Southampton | 15 | 1 | 2 | 12 | 11 | 31 | -20 | 5 |
| > Premier League Full Table | |||||||||
