Mancini ended a 44 year wait for a league title for the club after Sergio Aguero hammered in the winner in the final 30 seconds against QPR on the final day last season.
Mancini told www.mcfc.co.uk:
“I am delighted to be able to give all of my efforts to Manchester City for a further five years. The opportunity which exists to build on our recent success is enormous.
“Manchester City is a fantastic football club, from the owner, chairman, Board and the executive team, through to the players, staff and fans.
“I am very much looking forward to the challenges and excitement ahead.”
Mancini took over Mark Hughes as manager at the Etihad Stadium in December 2009 winning 85 of his 141 games in charge.
City qualified for the Champions League in 2011 after finishing 3rd in the league and defeated Manchester United en route to their first FA Cup trophy since 1969.
An outrageous rumour had been flying around that the Russian Football Union were looking at Mancini to take over the vacant Russia job.