The 20-year-old is yet to feature in the Premier League but enhanced his reputation with a prolific loan spell at Feyenoord last season, scoring 20 goals in 23 appearances. That form led to speculation over his future but City have moved to tie him to a new deal.
Guidetti, who joined City as a 16-year-old, told the club's website, www.mcfc.co.uk: "I feel really happy of course, it's a fantastic football club and to sign a new deal is really, really good."
He added: "I've been here for a long time and Manchester City are the ones who have helped me grow and develop to the player I am today, so I am very grateful for that and I've seen how the club has turned into one of the biggest clubs in the world and it is great to be a part of that."
Guidetti returned to City after suffering illness towards the end of the last campaign and he is still fighting back to full fitness.
He said: "It's going well - I can run, I can shoot, I can pass, so I am definitely getting there, but we have to be a bit more patient and of course I want to get out there every day, it's what I long for."
Source: PA
Source: PA