The defender, who is not in England's World Cup squad for this summer, has won eight trophies, including one Women's Super League title, in 233 games for City.
"I want us to be competing on all fronts in terms of trophies and I want to play a big part in that," she said.
Houghton has 121 England caps and captained her country for eight years, but has not played for the Lionesses since 2021 because of injury problems.
