The Frenchman scored 12 goals and made 11 assists in 2013-14 as Manuel Pellegrini's side returned to the top of English soccer, although he was left out of Didier Deschamps's World Cup squad as a result of a personal disagreement with the France boss.
Nasri believes that he is now entering the peak of his career and is hopeful of adding to his two league titles as a City player.
MORE: Beautiful people in Brazil | USA MVP rankings
"I'm really happy to have signed this contract and to have committed my future with City," he told the club's official website. "It’s exactly what I wanted when I joined this club and I am very happy that I found an agreement and I hope that we can continue to win titles.
"I'm 27 now and, if you listen to some of the best managers in the game, they say that a midfield player's best years are between 27 and 30 so I hope that I will give my best years to City. It took me time to adjust to living in Manchester because, when you move here from London, it is a big change but last year everything was perfect — I enjoyed my football and I love living in Manchester, feel very settled and I think that showed on the pitch.
"That's why I've agreed this new contract — because I feel very much at home. Our supporters have been right behind me and it gives me the confidence to play my best game. Now I'm looking forward to the new season and to defending our title again."