The 35-year-old has been at City since their formation in 2014 and will reach a decade at the club next year.
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.
She played 14 times in the Women’s Super League for City last season.
“I’m realistic to know that I’m not potentially going to play every single game but the games that I do I want to keep my place, I want to fight for my shirt,” she added.
“I feel as though I’ve done that over the last few months in terms of big games and I’ve proved myself I can play at this level.”