The deal will reportedly see the bookies deliver a tailored online service for club supporters through exclusive bets and offers around key fixtures.
Both partners will also collaborate on marketing opportunities through access to first team players for promotional work and the use of hospitality at the Etihad Stadium.
Commenting on the partnership, Tom Glick, Chief Commercial and Operating Officer for Manchester City Football Club, said:
“We’re pleased to continue to be working with Paddy Power to provide City fans with more excitement as they follow the club they love.”
Paddy Power, company spokesman, added: “Working with Manchester City and their passionate fan base over the last two seasons has been brilliant and we’re excited about continuing to provide them with unbeatable value, as well some great entertainment throughout the season.”