The 24-year-old Argentina international is now contracted to City until 2017, the club confirmed on Saturday.
Aguero joined City from Atletico Madrid in 2011 for £38million and ensured his place in the club's history books when he scored the last-gasp winning goal against QPR to seal the 2011/12 Premier League title and end the Blues' 44-year wait for the title.
Aguero recently played down talks of a move away from the Etihad in the summer, saying: "I'm very happy at City and I feel very appreciated. 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, and that always reminds me of our title and that goal against QPR. I can never forget that moment.
"Now I am looking forward to next season and pushing hard to win the title again."
Aguero had been linked with a move back to Spain, with Real Madrid believed to be interested in signing the striker.
Source: Manchester City MAD