The proposed expansion will make the Etihad the second largest ground in England's top flight, with only Old Trafford - home of City's fierce rivals Manchester United - holding more.
City intend to initially redevelop the South Stand, by adding an initial 6,250 seats, while permission has been granted to do the same to the North Stand and to add a further 2,000 at pitch-side.
The plans will bump the Etihad's capacity from 48,000 to approximately 62,000.
A statement on the club's official website read: "Manchester City Football Club has today (Friday) received formal notification of the granting of planning permission to expand the Etihad Stadium.
"It is the club's current intention to first proceed with the development of the South Stand.
"The opportunity also exists to expand the North Stand and to introduce additional pitch side seating in the future for which planning permission has also been granted."
