The 19-year-old Nigerian hit 14 goals in his breakthrough campaign at the Etihad Stadium last term, and now looks set for a pivotal role under new boss Pep Guardiola.
City's new boss has already made headway on a rapid overhaul of his squad, but fresh terms for Iheanacho suggest the teenager will continue to command regular first-team action.
"I can't express how I'm feeling, I'm very happy to sign my deal for this club, I'm excited," Iheanacho told City's official website.
"I just need to keep working hard and express my feelings on the pitch, and work really well and do great things for the team.
"I'm happy and I appreciate everything the club has done for me so far at this point so I really need to help and work for them as well."
City boss Guardiola admitted Iheanacho has already impressed with his approach since the former Barcelona manager arrived in the north west over the summer.
"Kelechi is a natural goal-scorer," said Guardiola.
"I knew about him before, but I've been really impressed with him since I arrived.
"I like his personality, his attitude, his ability: we hope to help him reach the highest level and to realise his full potential."
Source : PA
Source: PA