The left-back, who moved north from Arsenal in July 11, has committed his future to City until 2017.
"I'm really happy to have agreed a new deal with City and I'm already looking forward to next season," Clichy told the club's official website.
"Things didn't go the way we wanted them to this year but we'll come back stronger next season and learn from this experience."
City are currently without a manager after sacking Roberto Mancini last week, but interim boss Brian Kidd said Clichy would be an asset to whomever came in to replace the Italian.
He said: "Gael is a crucial member of this team and we're all delighted he's committed his future to Manchester City.
"We are building a side that will challenge for honours for years to come and to do that, you need top quality players - Gael comfortably fits into the bracket.
"Gael is a top professional off the pitch as well as on it and his attitude and conduct is faultless. He is a manager's dream."
The France international, 27, has made 74 appearances for City and won the Barclays Premier League with them last season.
They were comprehensively beaten to the title by city rivals United this term, though, and Clichy is determined to bounce back.
"We are just going to keep moving forward and raising the bar," he said.
"We know where we want to be and with the talented players in our squad there is no reason why we can't achieve our targets.
"When I look around me and see the quality players and the plans that are taking shape at Manchester City, I know that I am in the right place."