Foden's previous deal was to expire in 2024 but the Premier League champion moved on Friday to secure its home-grown talent for longer.
He is the star graduate of City's celebrated academy, which has become one of the most successful in world soccer.
The 22-year-old Foden has become a key player under City manager Pep Guardiola and played his part in four title-winning campaigns, collecting 11 trophies in total.
``He's made me 10 times the player I was,'' Foden said. ``He's improved all aspects of my game and I'm just thankful to have him here and I'm enjoying my football with him.``
Foden has seven goals in 13 games, including a hat trick in the 6-3 win against Manchester United this month.
``We feel he can progress further and become even better than he is today,'' City director of football Txiki Begiristain said. ``By signing this contract, he now has stability, and can focus absolutely everything on becoming one of the best players in the world, which we feel he can be.''
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