The 36-year-old's previous deal was due to expire at the end of this month and the midfielder had external offers from one Premier League club and two from overseas but he chose to remain with Liverpool.
After City Lost to Chelsea 1-2 away from home and Jurgen Klopp's Reds won 4-0 against Crystal Palace 4-0, the results implied that City could not mathematically go past Liverpool.
Liverpool have now taken a lead of 13 points at the top of the Premier League points table.
Milner's injury is not supposed to be a serious one.
Milner has been in great form for Liverpool this season and his injury is a massive blow.
Did the Liverpool winger deserve to win the FIFA Puskas Award ahead of Cristiano Ronaldo and Gareth Bale?
Klopp raised a few eyebrows when he took of Shaqiri at half-time for James Milner.
Milner's been on a roll since the season got underway, both on and off the pitch.
The 52-year-old German was in a chirpy mood when he gave the team-talk at Celtic Park.
Liverpool have maximum points after three matches in the English top-flight.
