The 18-year-old, currently on a season-long loan with Alaves, said on Twitter he is “really proud and happy to have signed a new deal with one of the biggest clubs in the world!”
Garcia arrived at City's youth academy in 2013 from Sporting Gijon and is widely considered to be one of the most promising young players at the Club.
He made four appearances for the City first team last season, scoring his first senior goal in the League Cup win over Crystal Palace back in October 2015.
He joined Alaves in August in a bid to further his development with the La Liga side.
Everyone at Manchester City is delighted to see Manu extend his time with the Club.