Guardiola is two years into the three-year deal he penned in the summer of 2016, but has now pledged his future to City until the summer of 2021.
"I am so happy and excited. It’s a pleasure to be able to work here," Guardiola told City's official website.
"I enjoy working with our players every day and we will try to do our best together in the coming years. As a manager, you have to feel good to be with the players – and I feel good.
"I will focus on the desire of my players to become a better team and every day that’s what I will try to do – to improve on the pitch and improve our players. We have a young squad with an average age of 23 and we want to keep taking steps forward and maintain the levels we’ve achieved this season."
The 47-year-old's new deal marks a coup for the Blues, who are keen to keep hold of their coach for as long as possible.
During his time at Barcelona Guardiola only signed one-year extensions, and even said at one point that if he could sign six-month deals he would do so. At Bayern Munich he honoured his three-year contract before moving to the Premier League.
City have long wanted to tie Guardiola down to a longer deal and their resolve has only increased as the team's impressive season progressed.
Initial talks had taken place not long into last season, but the decision was made to push back formal negotiations until the summer as it had quickly become obvious that all parties were keen to renew.
City had established a lead at the top of the Premier League table at that time and neither Guardiola nor the club wanted any distractions.
However, by early spring it became clear that City would win the title and Guardiola's agent, Josep Maria Orobitg, began ironing out the terms of an extension with the City hierarchy.
“This season has been another step of our strategic plan and the continuous effort to improve the football we play," said CEO Ferran Soriano.
"We are very pleased with the progress. There is more work to do and having Pep committed to Manchester City for the next three seasons gives us the stability to be able to continue our journey to beautiful football and success for the club.”