Goalkeeper James Trafford said Manchester City is "the place I call home" as he returned to the club from Burnley in a deal worth £27m plus add-ons.
The 22-year-old City academy graduate signed for the Clarets for up to £19m in July 2023.
He impressed last season as Scott Parker's side won promotion back to the Premier League - keeping 29 clean sheets across 45 Championship games - and was named in the division's team of the year.
City had a buy-back clause for Trafford and also matching rights, allowing them to match any offer from another club.