At a news conference at the arena, the club also unveiled their own team jet, an Airbus A-330 in the team's sky blue colours with their name and badge emblazoned on the sides.
The deal, according to widespread British media reports, is worth a reported 150 million pounds spread over the next 10 years, and will give the club a major revenue boost, allowing them to comply with UEFA's new financial fair play rules which come into effect for the 2013/14 season.
UEFA though, are likely to examine the deal because under the new regulations clubs are not allowed to spend more than they earn. If UEFA feel the sponsorship deal has been inflated to give income levels an artificial boost, then they could take action.
The estimated worth of the deal trumps the previous British record naming rights deal secured by Arsenal, who struck a 15-year agreement worth 100 million pounds with Emirates Airways in 2006.
Etihad, City's major sponsor, is the national airline of Abu Dhabi and the deal reflects the links with the club's wealthy owner Sheikh Mansour bin Zayed Al Nahyan.
City are already regarded as the world's richest club because of Sheikh Mansour's wealth, estimated at some US$1.0 trillion.
The new deal further enhances their spending power, while at the same time enabling coach Roberto Mancini to build a team capable of displacing rivals Manchester United at the top of the English and European game.
GLOBAL VISIBILITY
In a statement on their website, the club said that by competing in the Champions League next season the "global visibility" of the Etihad Stadium will be "dramatically enhanced" and they expect up to two million visitors to attend the venue and its surrounding attractions over the next year.
At the same time Etihad Airways announced the introduction of a new twice-daily flight service between Manchester and Abu Dhabi from August 1.
Etihad Airways has also extended its shirt sponsorship deal as City's brand awareness grows following its third-placed finish in the Premier League last season and the club taking part in the Champions League for the first time.
Passengers on Etihad flights will also be able to watch City-related programmes and match coverage on the airline's in-flight entertainment system.
Many other shared programmes are planned including training and development of young players in disadvantaged areas both in Manchester and overseas.
City's chief executive Garry Cook said: "We are delighted to be expanding our relationship with Etihad Airways through this comprehensive partnership agreement.
"The agreement creates exciting opportunities for our two organisations to cooperate more deeply commercially and on media and community initiatives in the future."
James Hogan, CEO of Etihad Airways, added: "It is a once-in-a-lifetime opportunity for two iconic brands that share the same vision to promote far-reaching global awareness and business growth."
Hogan added a call centre for the airline will open in Manchester in 2012 employing up to 160 people.
