The 22-year-old centre-back has impressed since joining City from French clubs Lens in January 2025 and has quickly established himself as an important part of the squad.
Khusanov enjoyed a successful campaign last season, helping City lift both the FA Cup and League Cup while also playing a key role in their runners-up finish in the Premier League.
The defender, who has made 30 appearances for Uzbekistan, also featured in all three of his country's Group K matches at the 2026 FIFA World Cup.
Speaking after signing his new deal, Khusanov said he was delighted to continue his journey at the club.
"This is a great day for me and my family. I am really happy to extend my stay at City," he said.
"I've enjoyed every minute since I arrived in Manchester and I feel I am growing and learning a lot as a player.
"I have a new challenge now, which is to impress new manager Enzo Maresca and his staff and ensure I am in his team regularly. I am determined to do that."
Khusanov becomes the second Manchester City player to commit his future to the club this week after England forward Phil Foden signed a new four-year contract.
City director of football Hugo Viana believes the young defender has all the qualities needed to become one of the world's best in his position.
"We've been really pleased and impressed by Abdukodir's development since he arrived in England," Viana said.
"We're seeing him grow into a brilliant young man and an outstanding defender - but we know this is only the beginning. His physical and technical abilities are top; he has all the assets needed to be a world-class centre-back.
"At just 22, his best years are all in front of him and his potential to get even better is clear for all to see."
Manchester City will play their next pre-season game against Inter Milan on Saturday, 1 August, at the Kai Tak Stadium in Hong Kong.