The France full-back joined the club from Arsenal in the summer of 2011 and his new deal keeps him at the Etihad until 2017.
Clichy was a regular starter as City won the Premier League last season and hopes he can help the club launch another title push after pledging his loyalty.
"I'm really happy to have agreed a new deal with city and I'm already looking forward to next season," he told the club's official website.
"Things didn't go the way we wanted them to this year but we'll come back stronger next season and learn from this experience."
City are without a manager following the departure of Roberto Mancini, but interim boss Brian Kidd is confident that Clichy will be part of the new man's plans.
"We are building a side that will challenge for honours for years to come and to do that, you need top quality players - Gael comfortably fits into the bracket," said Kidd.
"Gael is a top professional off the pitch as well as on it and his attitude and conduct is faultless. He is a manager's dream."
City trailed behind champions Manchester United in the current campaign, but Clichy still has faith in his team-mates and did not think about leaving.
"We are just going to keep moving forward and raising the bar," he said.
"We know where we want to be and with the talented players in our squad there is no reason why we can't achieve our targets.
"When I look around me and see the quality players and the plans that are taking shape at Manchester City, I know that I am in the right place."