The Argentina striker now has 178 goals for City, surpassing Eric Brook's tally of 177.
Brook scored his final goal for the club in 1939, meaning Aguero has broken a record that had stood for 78 years.
And, while Brook scored his goals over an 11-year period with City, Aguero has managed to surpass him in little over six.
178 – Sergio Aguero is now the highest scoring player in Manchester City’s history (178 goals in 264 apps). Iconic. pic.twitter.com/6RSx7wwHo1— OptaJoe (@OptaJoe) 1 November 2017
Aguero equalled the record with a penalty against Burnley in October and, although he converted from the spot in a penalty shoot-out against Wolves in the Carabao Cup last week, it did not count towards his total.
But he struck against Napoli after being restored to the starting line-up for the Champions League tie by manager Pep Guardiola.
With Napoli having pegged City back to level at 2-2 from the penalty spot on 62 minutes, Aguero restored his side's lead seven minutes later with a cool finish from just inside the penalty area following a lightning counter-attack.
He kicked off his City career by scoring twice on his debut, against Swansea City in August 2011, and ended his first campaign in English football by scoring perhaps the most dramatic goal in the league's history; the last-gasp winner against Queens Park Rangers which clinched the Blues' first title since 1968.
That was his 30th goal in all competitions that season, and he has scored at least 28 goals in five of his six full seasons in England.
Last season under Guardiola he scored 34 times in all competitions, more than he scored in a single campaign under Roberto Mancini or Manuel Pellegrini.
He began the current campaign needing eight goals to match Brook's record and nine to beat it, and he has managed it in his first 11 appearances.