The Spanish playmaker's new five-year contract was confirmed on Twitter.
The club took to Twitter to confirm the deal, which will run until Silva is 33.
"From the moment I joined the club four years ago it has felt like a second home to me," Silva told the Manchester City website.
“On and off the pitch, I feel incredibly content and fulfilled professionally and personally, so why wouldn’t I want to stay and keep winning trophies with this fantastic team?
“Over the last four years, we have achieved so much together, establishing City as a dominating force in England and now, when I look around this dressing room, I can see no reason why we won’t become one of the top teams in the world.
“It was a straightforward decision to extend my stay here and spend my peak years at Manchester City, a club with unbelievable fans who have always supported me."
Silva has been an instrumental part of the club's success since he joined the club from Valencia for £24 million in 2010.
He has scored 27 goals in 179 appearances for the Eastlands club, and led the Citizens to two Premier League titles as the side's creative fulcrum.
City fans will hope that with Silva on board for the remainder of his best years there will be more honours to come at the Etihad Stadium.