The 27-year-old France midfielder has committed his future to the club until 2019 after enjoying something of a rebirth under Manuel Pellegrini last season, when he scored 11 goals.
"I'm really happy to have signed this contract and to have committed my future with City," he said on the club's website.
Nasri, who joined City from Arsenal in 2011, has scored 22 goals in 129 appearances for City and won two Premier League titles as well as the League Cup with the club.
"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," Nasri added.
"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."