Former City manager Roberto Mancini signed the Bosnia international from Wolfsburg in a £27m deal in 2011.
Despite often seeing other strikers start in front of him, Dzeko has scored 46 goals in 109 Premier League games for City, playing a key role in helping them win last year’s title.
Dzeko laid on City’s opener for David Silva in the 2-0 win at Newcastle on Sunday and was praised after the game by boss Pellegrini.
“He finished last season playing very well and was one of the best players in this game," Pellegrini said. "He worked hard and won a lot of aerial duels. It was a complete game from him.
"It's not strange for me to see him play like that - he finished last season playing very well. He has grown. He's a team player.
“I'm very happy for him. That's why he is renewing his contract here - he has a very important duty in our team. But I repeat, Edin finished last season playing the same way as he has started.”
Pellegrini added: "I don't think it's 100 per cent finished - but yes he will renew his contract. He's a very important player for us.
"It is important that we have four top strikers because we have so many games in four competitions."
A deft back-heel from Dzeko allowed Silva to give City a 38th minute lead at St James' Park before substitute Sergio Aguero added a second in injury-time.
And Dzeko believes City will get stronger, and quickly.
“It's just the beginning of the season and it will be, definitely, a long season with the five teams fighting for the title. This is just the beginning,” he told City TV.
"It's good to start with a win, but we are not there. There are so many games to come and we have to prepare for the next one, for the big game against Liverpool to try to win at home.
"We have brought in some great new players. Some of them still need time because it was the World Cup and a lot of us came later to the pre-season.
"I think we can still improve a lot. Each game, we can be better and better and just try to continue where we finished at Newcastle."