Capped 46 times by England, he scored twice against Spain last month - his first worldwide goals for three years.
Sterling played a vital part last in last season's domestic title success, scoring 18 goals and setting up another 11.
City have now confirmed that Sterling, 23, has signed a contract extension that will keep him at the club for another five years.
But Sterling feels at home at City and believes the Premier League champions are the ideal place for him to continue developing.More news: Death toll climbs as Northern California wildfire spreads
'I'm delighted to sign, ' Sterling told the club's official website. I felt from the minute I got here it was the right choice for me.
"Every season you come in you want to do better than your previous season". You want to try and develop and get better.
Liverpool fans could be forgiven for feeling a sense of regret over Sterling leaving Merseyside for City in 2015 - especially those who equate his decision with betrayal.
'With the facilities we've got here there's no reason not to.
However, the England worldwide opted to remain under the tutelage of Guardiola, as they continue preparations for Saturday's derby clash with Manchester United.More news: ‘Star Wars’: Diego Luna to Lead Spinoff Series
Sterling bagged three of those goals, while also winning a controversial penalty against Shakhtar that he later admitted shouldn't have been given.
"This is a significant moment for the club", Manchester City director of football Txiki Begiristain said.
Meanwhile, Legit.ng previously had reported that Premier League champions Manchester City are reportedly struggling to reach a new agreement with their star winger Raheem Sterling.
'His statistics tell their own story.More news: Gigi, Bella Hadid walk together for a fashion show