Toure, whose powerhouse displays were at the heart of City's run to the league title last season, said he was keen to end his career at the club he joined from Barcelona in 2010.
"This is where I want to be," the 29-year-old Toure said on the club website.
"When I first arrived at City every time I went to sleep I would dream about us winning something; now it is about us being the best team in whatever competition we take part in.
"I will never forget how I have been treated here by the fans, the club and the owners and nothing would give me greater pleasure than to finish my career as a Manchester City player."
Toure joined City in a 24 million pounds deal and his driving displays quickly made him pivotal to Roberto Mancini's side.
He also scored the only goal in City's FA Cup final victory over Stoke City in 2011, their first major trophy since 1976.
The Ivory Coast international and current African Footballer of the Year knows City face an almost impossible task to prevent rivals Manchester United winning the league this term but says they are determined to end the season on a high.
"Of course now it looks likely that we will not successfully defend the Premier League title and that is sad for all of us but we can still finish second and win the FA Cup for a second time in three years and that is still an achievement for a club that won nothing for a long time," he said.
"We must try to finish on a high note and then start preparing to win more next season. Football is always a challenge and always a puzzle to solve and that is why we all love the game."
