The Brazil international, due to see his existing terms expire at the end of the current campaign, is now tied down at the Etihad Stadium until the summer of 2020.
Fernandinho has been in talks with the Citizens for the past month and, having finally put pen to paper on a two-and-a-half-year deal, he wants to prolong his career in Manchester until the latter stages of his career.
"This is a club with a fantastic future and I want to be a part of it for as long as possible," he told the club's official website.
"With Pep [Guardiola] in charge, I feel sure we can win significant silverware and, importantly, we will try to do it playing attractive, attacking football. It's a pleasure to be a part of this Club and I look forward to seeing what the next few years bring."
Director of football Txiki Begiristain added: "We're delighted Ferna has signed his new contract. He is a senior member of the squad and his professionalism and work ethic are second to none. His form has been fantastic this season and we're happy he's extended his deal for a further two years."
Fernandinho joined City from Shakhtar Donetsk in 2013 and has featured 212 times for the Premier League champions-elect.