The 24-year-old, who joined City in a then club record GBP 57 million (USD 74 million) deal in January 2018, is now committed to the club until 2025.
The French centre-back has excelled this season, becoming a mainstay of a side challenging for success in four competitions.
"I could not be happier to commit my long-term future to Manchester City," said Laporte.
"The club offers me everything I need to improve my game. I've already made great strides and I want to continue getting better and better."
Laporte came through the youth ranks at Athletic Bilbao and was first targeted by City in 2016.
He chose to turn down a move at that time, preferring to continue developing in Spain, but City eventually got their man and believe they have done smart business.
The announcement comes two days before City face Chelsea in the League Cup final at Wembley. Laporte expects it to be the first of several big games as City chase what would be an unprecedented quadruple.
He said:"All the matches that we have got from now until the end of the season are finals. We will try to win them all and try to achieve our objectives."
City thrashed Chelsea 6-0 when the sides met at the Etihad Stadium a fortnight ago but Laporte says that counts for little now.
He said:"Their results recently haven't been good but they have a great squad, great players and they have shown that they know how to play good football.
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