The Italian had 12 months remaining on his existing deal and although there were reports linking him with the Russian national team, a swift end has been put to all speculation over his future. But he is keen to use City's first title for 44 years as a platform for further improvement.
"The opportunity which exists to build on our recent success is enormous," he told mcfc.co.uk. "I am very much looking forward to the challenges and excitement ahead. I am delighted to be able to give all of my efforts to Manchester City for a further five years."
He added: "Manchester City is a fantastic football club, from the owner, chairman, board and the executive team, through to the players, staff and fans."
The new contract is a tangible reward for pipping near-neighbours Manchester United to the Barclays Premier League on a dramatic final day in May.
Having joined City in December 2009 as a replacement for Mark Hughes, Mancini has overseen gradual improvement as the club have risen from fifth at the end of his first season to third and then ultimately top spot.
During that time the club picked up their first trophy for 35 years with victory in 2011 FA Cup final. Prior to arriving in Manchester, Mancini collected three Serie A titles and two Italian Cups and City's interim chief executive officer John MacBeath said success at the Etihad Stadium had only enhanced the manager's reputation.
"Roberto's managerial credentials have been well proven in Europe for many years," he said. "And in leading a team which has won the FA Cup and an unforgettable Barclays Premier League title in successive seasons, his ability to manage in the English domestic game is also undisputed.
"This new agreement allows Roberto to focus on the challenge of guiding a team which is capable not only of defending the Premier League title, but one which can compete for European honours."
With Mancini's contract now sorted, plans can continue for their Premier League defence with City announcing a pre-season friendly against Wolfsburg - from whom they signed Edin Dzeko for ?27 million in January last year - on August 4.