The Ivorian midfielder, 29, has agreed a new contract worth around £11m a year, just a couple of weeks after he was reportedly on the verge of quitting the club.
His wages of just over £210,000-a-week will remain unchanged.
Toure, who joined from Barcelona for £24m in the summer of 2010, had grown frustrated at a lack of progress in contract negotiations and his agent Dimitri Seluk went on record to say the player could move in the summer.
But the defending Premier League champions have moved quickly to complete negotiations after the international break and will confirm the new deal later today.
His influence in City's midfield remains as strong as ever and Toure was a little confused that a new contract had not been sorted in the first half of the season.
City's hope of retaining the Barclays Premier League look slim as rivals United currently enjoy a 15-point lead at the top, but they could reduce that deficit in Monday's derby at Old Trafford.
