Dunne is a forceful presence in the City defence

Dunne, 27, joined City from Everton in October 2000 and has become a vital presence in the City defence during the past two seasons.

"It's terrific news," the Republic of Ireland international told the club's website. "I'm delighted that the club has shown their faith in me.

"I'm very settled here and believe the club is going in the right direction."

Dunne endured some troubled times at the City of Manchester outfit but has revived his career in the last two seasons and now seems to be vital to manager Stuart Pearce's plans.

"I've had terrific support in the last couple of years - particularly from the fans," added Dunne.

"I think we've got a great nucleus of a squad to progress next season and I'm really looking forward to the new campaign already."