The experienced goalkeeper originally moved to the Etihad on a year-long loan from Derby County last summer.
The 34-year-old has subsequently spent the past 12 months providing valuable back-up to Ederson and the now-departed Claudio Bravo in the first team goalkeeping department.
Capped four times by England, Carson boasts a wealth of experience from his 17-year career and counts West Bromwich Albion, Liverpool and Turkish outfit Bursaspor amongst his former teams.
Before joining City on loan in the summer of 2019, the Whitehaven-born keeper had spent the previous four seasons at Pride Park where he made more than 150 appearances for the Rams.
Everyone at Manchester City wishes Scott the best of luck throughout the next 12 months at the Club.