The 19-year-old told the club's official website: "I'm really pleased that I've signed for another three years.
"It takes me up until I'm 22, so it's good to not have to worry about things for a while."
Despite the success of last season's loan spell with Norwich, Evans is now eager to make his mark in the City first-team under new manager Mark Hughes.
He added: "It's important to be playing first-team football and hopefully I can do that here.
"With the new manager here now, I think I'll get a chance to impress now, I went to Germany and now I'm away with the squad in the Faroe Islands. So that gives me the confidence that he'll give youth a chance."