The 34-year-old originally moved to the Etihad Stadium on a year-long loan from the Rams last summer.
Former West Brom and Liverpool keeper Carson has yet to make a first-team appearance for Pep Guardiola’s side.
Carson, capped four times by England, was back-up to Ederson and the now-departed Claudio Bravo last season.
“Everyone at Manchester City wishes Scott the best of luck throughout the next 12 months at the club,” read a club statement.
Chile international Bravo left the club on Tuesday and his place as second-choice keeper at City could be taken by Zack Steffen.
The 25-year-old spent last season on loan at Fortuna Dusseldorf and may return from his stint in the Bundesliga to push for a first-team place under Guardiola.