The 36-year-old has made two appearances for the Sky Blues since his initial arrival at the Etihad Stadium in 2019 with his debut coming against Newcastle United in May last year.
Carson joined City on a two-year loan from Derby County in 2019 and provided backup for Ederson before making his temporary stay a permanent one last summer after his contract with the Rams expired.
Speaking to the Sky Blues’ official website about his new deal, he said:“I’m delighted to be staying with City for another season.
“To work with Pep, the coaches and such talented team-mates is a real honour and one I relish every day.
“I have already gained so much from my time here and hopefully I can keep helping to push the club’s other goalkeepers to be the best they can be.”
The shot-stopper, who has earned four caps for England on the international stage, is a valued member of Pep Guardiola’s squad due to his experience in the game.
Txiki Begiristain, City’s Director of Football added: “Scott is an exemplary professional and his experience is of real benefit to the entire squad.
“His teammates, especially the goalkeepers, have great respect for his achievements in the game and his support has been a huge help to them.
“As he has demonstrated, we know he is always ready to play should he be called upon.”
The new campaign marks Carson’s 19th as a professional footballer with the 36-year-old winning seven trophies to date, including two Premier League titles with the Sky Blues.
His second outing for City came in their round of 16 second-leg tie with Sporting Lisbon in March.