The 27-year-old’s new deal sees his £80,000-a-week wages increase and also means he will have spent eight years with the Citizens by the time 2027.
Cancelo, at the contract signing which took place earlier on Tuesday, said that he is in the best place to achieve his career ambitions.
“Manchester City is a fantastic club, so I am incredibly happy to have signed this new agreement,” he told the club’s official website.
“City players have everything they need to reach their full potential, with amazing facilities, world-class teammates and an incredible manager who pushes us every single day.
“There is nowhere better to play football and it’s a pleasure to work here.
“I have so much I want to achieve before my career ends, and Manchester City offers me the best chance of fulfilling my ambitions.
“This new contract means I now have complete focus on improving my game and winning more trophies with this team.”
The former Benfica man signed for City in 2019 from Juventus in a deal that saw Brazilian right back Danilo move the other way. He showed glimpses of his quality in that season, but really came into his own in his second season.
Now in his third season, there is no better full back than Cancelo in world football at the moment, who has morphed into an all-round player that can handle both the left and right back positions, centre back position and provide cover for the defence as a defensive midfielder.
Since joining City in the summer of 2019, Cancelo has played 106 games, scoring seven goals and providing 14 assists, and winning three major trophies along the way.
Cancelo is the ultimate professional, City chief says
Director of Football at City, Txiki Begiristain expressed happiness at Cancelo’s extension. Speaking to City’s official website after overseeing the Portuguese’s extension, he said: “Joao is the ultimate professional. He absolutely loves football and applies himself every single day in a bid to become better.
“He sets really high standards, and any young player should observe the way Joao applies himself if they want a blueprint for success.
“Not only does he have incredible talent, he also displays perfect dedication to this sport. That’s why he can play so many games at such a high level. His consistency during the last two seasons has been amazing.
“He is so versatile. Whether he plays right-back, left-back or in midfield, he operates at the same high level. That is a dream for a manager.
“I am really happy he has signed, and I can’t wait to see him develop in the coming years.”
Guardiola has once described the Portuguese fullback as a diamond due to his incredible stamina and versatility, which has made Cancelo a staple in the Spaniard’s squad despite all his tinkering.
“When one player arrives from another culture, he needs time to adapt, even myself needed time. The way we wanted to play, he needed time. Sometimes you are patient, sometimes not.
“But Joao since he arrived he played good but he has one huge quality – he loves playing football!” the City boss said earlier in the season about Cancelo’s qualities.
“When you find a player like that, like Riyad [Mahrez], Phil [Foden] is like this – you have a diamond in your hands.
“Most players like football but these three players I mentioned are like little boys playing in the street or in school. This is great. That is why Joao is consistent in his game.”
Manchester City move did not excite me at first, Cancelo says
Cancelo has been a revelation for City and his impact is what led to the club finding ways to secure his future at the Etihad for longer, even though he had three more years on his current contract.
That impact was also recognised by his peers as they voted him in last season’s PFA’s Premier League team of the season. Cancelo has 30 starts in all competitions for City this season and has only sat out just one Premier League game.
The former Juventus man said at his signing that City has elevated his game to another level.
“It makes all the sense to extend my contract with Manchester City,” said Cancelo.
“I have learned how to become a more versatile player. I feel I can play in different positions now, not only right-back or left-back.
“I feel I can play in several positions on the pitch, and I think (it) is easier in this team because of the quality all the players have. It’s easier to play in this team than in any other team.”
Cancelo also revealed that he was initially dissatisfied with his move to City back in 2019.
“In my first months, I wasn’t extremely happy about my decision to join Manchester City,” Cancelo admitted.
“I came from a club that I also like a lot, Juventus. I spoke to my girlfriend, and we agreed that I had to make the best out of myself to be able to play.
“As of December-January onwards, I started playing regularly so that makes a player happier. We players always want to play, but always with the aim of helping the team to achieve its goals.”
He also cites fellow Portuguese internationals Bernardo Silva and Ruben Dias for helping him settle into his place at City.
“Since I arrived, Bernardo Silva has been a great friend to me and a great support to me, both for me and my family.
“I have known him for a long time, we have built a good friendship since we were young.
“He has helped me a lot here. Also, I knew Ruben Dias from Benfica, but not as much as I knew Bernardo. Bernardo is from the same generation as I am.
“Ruben Dias has also helped me a lot. Both are very calm people, so they help me to be more relaxed as well.”
Cancelo said he wants to win all the trophies available this season, a feat that is likely as City remain favourites in every competition they are in.