The striker, who played a starring role as Argentina won the 2022 World Cup in December, will remain at the Etihad until the summer of 2028.
Alvarez moved to Manchester last July, joining from River Plate where he forged a reputation as a deadly goalscorer. He managed 54 goals and 31 assists in 122 River Plate appearances – including a strike in their 4-0 win over Racing that sealed the 2021 Argentine league title.
Widely considered one of South America’s top talents, he has enjoyed a fine debut season in English football, scoring 10 goals in 33 games, as well as bagging four at the Qatar World Cup as Argentina lifted the trophy for the first time since 1986.
Alvarez says he could not be happier to extend his City stay – and believes he has plenty of room for improvement during the course of his new deal.
Alvarez said: “This is a very proud moment for me and my family. For a club like City to put their faith in me like this is amazing.
“I have been really pleased with my first season here, but I have plenty more I can do. I know I can be better, and City offer me everything I need to fulfil my potential.
“I want to thank the manager, the coaches and everyone at City who works behind the scenes for everything they have done for me since I joined in the summer. I could not have asked for more. This is a club that looks after its players, and I have felt so supported throughout my time here.
“I am now focused on getting better and helping City win trophies.”
Director of Football Txiki Begiristain added: “Julian has impressed everyone at Manchester City with his technical ability, dedication and attitude.
“He is the ideal blueprint for a young footballer and an inspiration to anyone looking to make their way in the game. He has shown already here in England he has outstanding movement and natural goalscoring instincts.
“We saw at the World Cup what a special talent he is. To win that trophy at his age is amazing and we are all very proud of what he achieved.
“His progress so far has been really good, but we are now fully focused on developing his game even further and turning him into one of the best strikers in world football.”
City agreed the deal to sign Alvarez from River Plate in January 2022, but the striker remained at his boyhood club until July in order to complete their Copa Libertadores campaign.
His final match for River came in the second leg of their Copa Libertadores last-16 match against Velez Sarsfield, a game which finished 0-0 and saw Velez progress 1-0 on aggregate.
He left River having won four major trophies, including the 2021 Argentine league title and the 2018 Copa Libertadores.
He made his senior international debut in a World Cup qualifier against Chile in June 2021, replacing Angel Di Maria with an hour gone, and was part of the squad that won the Copa America a month later, a wonderful precursor to their World Cup triumph just three months ago.
In total, he has 19 caps for Argentina, scoring seven goals.
Everyone at Manchester City is delighted for Julian and we are all looking forward to watching him develop in the coming years.