The new deal will keep Fontaine at the club until the summer of 2014.
“I’m obviously pleased to get the new deal done and dusted,” the 26-year-old told the club’s official website.
“I’m looking forward to working with the gaffer and Doc (assistant Tony Docherty) to implement their plans for the club.
“Everything I’ve seen and heard so far has impressed me and they match my ambitions and everything I aspire to achieve.
“The six years I’ve spent at the club to date have been superb, I’m settled with my family and love the city. I’m just thrilled with the new contract and can’t wait to get fit again and playing once more.”
City boss Derek McInnes added: “I’m absolutely over the moon that Liam has agreed to sign the new deal with us.
“We’ve been speaking for the last few weeks, as he’s one of the key players who we were keen to get secured for the future.
“It’s a great bit of business for the club and I’m delighted Liam sees Bristol City Football Club as key to him at an important stage of his career.”
