The left-back impressed during his short term deal after joining the Blues from PSV Eindhoven in January.
Ball made 14 appearances and scored a vital goal against Preston in the FA Cup.
Despite offers from other Barclays Premier League clubs, Michael decided to stay with City for what could prove to be an exciting season ahead.
The 27-year-old defender has previous experience of his new Manager, having gained his one England cap under Eriksson, in the 3-0 friendly win against Spain in 2001.
Sven-Goran Eriksson is pleased that Michael’s deal has been agreed, and he says:
“Michael’s experienced, having played in Scotland and Holland as well as England, and it’s good that he is staying with us as he’s going to be very useful. We had to build on what was good here, and there was a lot that was really good, so I’m happy that he’s signed and he is happy as well.”
