The German midfielder has extended his stay at the Etihad Stadium by signing a new four-year deal.
Gundogan joined City from Borussia Dortmund in 2016 and had entered his last year of this previous contract.
“I am very happy,” Gundogan said after signing the new contract.
“I feel privileged to work with this great group of lads and with Pep.
“Playing for this club for three years is an amazing feeling and I am very grateful that I can continue and hopefully we can achieve more nice moments.
“We have great players and have already achieved a lot, but I think there is more to come. We have a lot of potential.
“I am happy that I can be a part of trying to get that out of us.”
Talks over a new contract stopped in March when the Germany international admitted he was considering running down his time at City to seek a new challenge.
But he has featured consistently for Man City during pre-season and he came on as a substitute in the Community Shield victory over Liverpool, netting his penalty as well.
City director of football Txiki Begiristain added:
“Ilkay’s new deal is more excellent news for our club.
“He has shown how important he is to the team and has played a huge part in everything that we have achieved so far.
“We are thrilled he has committed his long-term future to Manchester City.”