Algeria winger Mahrez has been rewarded with a new deal that keeps him at City until 2025 after helping them retain the English title.
Since arriving from Leicester for £60 million ($71 million) four years ago, Mahrez has made 189 appearances for Pep Guardiola's side, scoring 63 goals and providing 45 assists.
The 31-year-old has won three Premier League titles, three League Cups and one FA Cup with City.
"I'm very happy to sign the new deal. I have enjoyed every single minute of my time here. It's a pleasure to be part of such an incredible club," Mahrez said.
"To have helped us achieve the success we have enjoyed in the past four seasons has been unforgettable and made us all hungry to look to achieve even more.
"I would also like to thank Pep, Txiki (Begiristain) and the coaching staff, both for the way they have helped me to develop as a player and for pushing me to continue to improve.
"Now I just want to try and play my part in helping us be successful next season and beyond."
Mahrez scored 24 goals for City in all competitions last season and looks set to play a key role this term following the departures of Gabriel Jesus and Raheem Sterling.
"Riyad has played a major part in our success in the four years since he joined us," City director of football Txiki Begiristain said.
"He is one of the most exciting wingers operating in the game and we are all very excited to know he will be part of our ongoing drive to try and achieve more success."