The new five-year deal will keep Hart at the Etihad Stadium until the summer of 2016.
“I’m absolutely delighted to have signed a new deal and it is a very exciting time to be a City player,” he told City’s official website.
“I can’t think of myself being anywhere other than City and it really feels like home. I feel very privileged to be staying here for another five years.
“When I signed from Shrewsbury it was always my aim to become the No.1 here and I was prepared to do anything to achieve that, including going out on loan a few times to prove my worth.”
Hart added on his predecessor Shay Given: “Shay’s influence on me has been massive and being able to work alongside him has brought my game on tremendously.
“I’ve lost a close friend and a fantastic team-mate but I’ll keep in touch and talk with him on a regular basis.
“Shay was always appreciative to the situation here at City and backed me all the way, as I would have done for him if the tables had been turned.
“I’ll continue to learn from Shay even though he’s now playing for Villa just by watching him on TV.”