Aguero famously scored the injury-time goal against QPR which clinched City the 2011-12 Premier League title ahead of rivals Manchester United.
Overall, he has scored 47 goals in 88 appearance for City.
Aguero had been linked with a move to Real Madrid but insisted the speculation was just rumours and he has backed up his stance by signing the new deal.
"I'm very happy at City and I feel very appreciated," the City website quoted Aguero as saying recently.
"It's been barely two years since I've arrived and sometimes I feel like I've been here for all my life.
"I have a fantastic relationship with the fans. That always reminds me of our title and that goal against QPR.
"Now I am looking forward to next season and pushing hard to win the title again."
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