Kompany, 28, is the most successful captain in the club's history and penned the new deal to keep him at City until 2019.
"When I arrived in 2008, I could never have dreamed that we could achieve what we have over the last six years but, for me, this is just the start of the journey," Kompany, who also captains Belgium, told the City website (www.mcfc.co.uk).
"Lifting two Premier League titles, the FA Cup and the League Cup have been four of the best days of my life but I believe that there are many more of these occasions ahead."
Since moving to the Etihad Stadium from Hamburg SV six years ago, Kompany has established himself as an integral part of the City defence and one of the finest defenders in Europe.
He joins Aleksandar Kolarov, Samir Nasri and David Silva in agreeing a new contract at the big-spending club ahead of the new Premier League season.
City start their title defence at Newcastle United on Sunday.