"I could not be happier," De Bruyne said. "Since joining City in 2015, I have felt at home. I love the fans; my family are settled here in Manchester and my own game has developed really well.
"This football club is geared for success. It offers me everything I need to maximise my performance, so signing this contract was a straightforward decision. I am playing the best football of my career and I honestly feel there is more to come."
De Bruyne has made more than 250 appearances for the club since joining from Wolfsburg in 2015. He is on course to win a third Premier League title this season and captained the side in their 2-1 win over Borussia Dortmund in their Champions League quarterfinal first leg on Tuesday.
He said his bond with manager Pep Guardiola, who signed a new contract earlier this season, was a key reason behind extending his stay at the Etihad.
"Pep and I see football in the same way," De Bruyne said. "Having that relationship with a manager is so important to me because our objectives are totally aligned, and we want the same things.
"My focus now is on ensuring we have a successful end to the current campaign. Our results and performances so far have been excellent, but we need to make sure we end the season with the silverware we deserve."