Starting his sixth season in a Manchester City shirt, Dias agreed to extend his contract - which was due to expire in 2027 - for a further two seasons.
The English club signed the 28-year-old centre-back in 2020-21 for 71 million euros and he has since won several titles in England, including four Premier League titles and the Champions League.
An undisputed starter in Pep Guardiola's team, the Benfica graduate has already made 223 appearances for the Cityzens.
"I'm very happy. I'm very proud to represent this club. City is where I want to be - at the top of the sport, competing for titles. The club's ambition aligns perfectly with mine and, as a footballer, there's nothing better than that," he said, speaking to the club's website.
Hugo Viana, Manchester City's sporting director, highlighted the Portuguese international's mentality.
"His work, professionalism and dedication are clear to us every day. He's a leader in the dressing room and on the pitch. He's one of our captains, the players listen to him and Pep (Guardiola) and his staff love working with him. He's a true professional," he said.
After making his debut for the club in a 1-1 draw with Leeds United, Dias has been named both Premier League and Manchester City Player of the Year, as well as being part of the Team of the Season for 2022-23. Since arriving in England, he has won a total of 10 trophies.