The 24-year-old Argentina international scored 12 goals in 30 league appearances last season, and netted the winning goal against Queens Park Rangers that secured them the 2011/12 title.
"I'm very happy at City and I feel very appreciated," he told the club's website recently.
"It's been barely two years since I've arrived and sometimes I feel like I've been here for all my life."
British media speculation had linked Aguero with a move to La Liga side Real Madrid, but he has become the latest City player after Gael Clichy, Yaya Toure and David Silva to extend his contract.
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'Andy Robertson has a decision to make as a player, where you either roll your sleeves up and give someone great competition or you accept decisions and say that your time is done.' Alan Shearer on the conundrum facing Arne Slot's Liverpool
