Walker has won two Premier League titles, two League Cups and a FA Cup since moving to Manchester from Tottenham for a reported fee of £50 million ($63 million) two years ago.
“I’m thrilled to have signed a new deal,” said Walker. “Playing for City has been everything I’d hoped it would be and more.
“It was an easy decision. I want to be competing for trophies, playing at the highest level, and I feel I have improved hugely as a player during my time here.
“The Club’s vision -– both on and of the pitch –- matches mine perfectly and I’m looking forward to spending the next five years here, hopefully winning more silverware.”
Walker, though, could see his place in Pep Guardiola’s side come under threat next season.
City are reportedly close to securing a deal for Juventus right-back Joao Cancelo for around £45 million.