His team won the Premier League by 19 points last season, setting a number of records in the process, and his new deal will nearly certainly make him the highest paid manager in English football.
"I am so happy and excited".
That heavy investment paid off with City winning the Premier League and League Cup, but Guardiola said fans should not expect similar spending.
We are going to try every day on the pitch to improve our players.
"I am trying, with all my efforts and desire to avoid that, and instead of making a step back we are going to make a step forward to maintain the level of this club".
If he completes the whole length of his new contract, Guardiola will have spent five years at City, longer than his time in charge of Barcelona and Bayern Munich. From where I want to play, how I want to play, with who I want to play with and how we are doing it.
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Guardiola arrived in Manchester boasting a glittering CV, including two Champions League crowns and three La Liga titles with Barca and three Bundesliga triumphs with Bayern.
"To be out of the Champions League and win the Premier League again, I'd sign for it now".
"We have all the conditions to be a stable club", he said.
But by throwing down the gauntlet to well-equipped and hungry heavyweight rivals, Guardiola's attempt to write the most glorious chapter in City's history could yet propel the Premier League into its third golden era.
He has his team playing good football and has done it all for a fraction of the investment that has been on display from the two Manchester clubs, who both have a net transfer spend of more than £400m over the last four years.
David McDonnell of the Daily Mirror reported Guardiola will now be paid £20 million a year-up from £15 million under his old contract-working out at around £385,000 a week.
Guardiola joined Man City at the start of the 16-17 season, and went trophy-less for the very first time in his career, calling the season a "failure".More news: Israel launches airstrikes against 'terrorist' targets in Gaza