The fresh deal makes him one of the highest-paid players in the Premier League.
As reported by The Times, it is believed that Foden will now pick up £200,000 per week at the Etihad.
Foden's new deal secures his long-term future with Man City, taking his terms up to 2027.
Upon putting pen to paper, Foden said: “It’s hard to put into words how happy I am to have signed this contract - it’s a dream come true.
“I have been a City fan all my life. I’ve trained here for so many years and I’ve even been a ballboy. I love this club so much, so to know I am going to be a part of it until 2027 feels amazing.
Foden was handed his debut at City under Pep Guardiola as a 17-year-old and has gone from strength to strength since, picking up several major team and personal honours.
He continued: “I’ve improved a lot in recent years and so much of that is down to Pep and his staff, who guide me every single day on the training field. Working with them gives me the best chance of improving even more and becoming the best player I can be.
“With the squad we have here, I feel I can keep learning and winning trophies. Those are the two most important things to me.
“I want to thank every single person at City because without them I would not be where I am today. All the academy coaches I worked with, all the players I’ve played with and everyone who works behind the scenes. It’s an honour to be part of this football club.”