The 28-year-old City skipper, whose previous contract expired next summer, had been linked with a move away from the City of Manchester Stadium.

But following talks with new manager Mark Hughes, he decided to sign on at the City of Manchester Stadium until 2012.

A "delighted" Dunne told the club's official website: "My first priority is, was and always has been to stay at City because I've enjoyed it so much and I feel really settled here.

"When Mark Hughes got the job, I think everyone was really pleased and I was thrilled that he seemed to make it a priority to sort my contract out. I'm delighted to be able to stay."

Hughes added: "I'm delighted with the outcome and Richard is a really important player for us.

"It was one of my priorities when I took the job that I made sure that he was one of the players we needed to keep."

Dunne revealed his decision to stay came shortly after Hughes' appointment.

"As soon as he did, we started to talk," Dunne said.

"It was literally a couple of days and it was all done and dusted.

"I'm pleased now that it's all been signed and sealed and I can relax a bit more now and concentrate on the season ahead."