The 34-year-old Argentine international has made 30 appearances this season in all competitions for the reigning Barclays Premier League champions.
He expressed his delight at signing a new deal at a Club where he has become something of a cult hero.
He told mcfc.co.uk: “I want to say that I am really proud and happy to have extended my contract for another year.
“Manchester City is a Club with a lot of ambition. We want to grow every year.
“When you get to hold a trophy, it’s the best feeling for any player.
“I want to say that I will fight for this Club and for my teammates until the end of my contract. I will fight to try and win titles.”
Demichelis has produced a series of accomplished defensive performances this year, picking up where he left off in the final months of the title-winning 2013/14 season.
His impressive debut term earned him a deserved recall to the Argentina national team squad for the summer’s World Cup where he excelled in the quarters, the semi and the final.
Demichelis doesn’t rule out the possibility of staying at City beyond 2016 but admits that at this stage in his career, he’s just taking every week as it comes.
“I had the experience of living in Germany for so many years, so it wasn’t so difficult to adapt to living in England,” he declared.
“We are happy here – my wife and son are happy here. We are trying to improve our English and I think that’s a good thing for our future.
“At this stage I am enjoying playing week to week – you can never say what can happen in the future.”
Demichelis has played 22 games in the Premier League this season and even popped up with a goal in the 2-2 draw with Arsenal at the Emirates Stadium.
He joined City from Atletico in September 2013 and overcame a challenging start to life in the Premier League, silencing the critics with his classy performances in the run-in alongside Vincent Kompany to help clinch a second championship for City in three years.
Before moving to Manchester, the composed centre-back spent nine years at Bayern Munich from 2002-2011 and played under Pellegrini from 2010-2013 at Malaga.
That was his second spell under Manuel – the pair first worked together at River Plate at the start of the century.
Demichelis joins Sergio Aguero, Joe Hart, Vincent Kompany, Samir Nasri and David Silva in signing a new contract at the Club this season.
