The 33-year-old Ivorian has become a first team regular again after being tipped by many to leave the club following manager Pep Guardiola's arrival from Bayern Munich.
Guardiola was allowed to name 17 overseas players in his group stage squad but three can be switched for the subsequent knockout phase, with Manchester City drawn against Monaco in the last 16.
The first, home leg is on Feb. 21 and second in Monaco on March 15.
City said on their website (www.mancity.com) that Toure had replaced the injured Ilkay Gundogan, recovering from a cruciate knee ligament injury, with Brazilian forward Gabriel Jesus also coming into the 21-man squad.
The Ivorian's agent Dimitri Seluk had angered Guardiola last September when he said the player felt 'humiliated' after being left of the Champions League squad.
Guardiola had replied then that Toure, a four-times African footballer of the year, would not play again for the club until he received an apology.
Toure apologised in November for 'misunderstandings' and made a sensational return with two goals on his comeback against Crystal Palace.
(Reporting by Alan Baldwin, editing by Pritha Sarkar)
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