Gundogan hit a purple patch during the first month of the year, scoring five goals to help Pep Guardiola’s men take total control at the top of the table.
The former Borussia Dortmund midfielder came out victorious in an eight-man shortlist that included teammate John Stones, Aston Villa midfielder Jack Grealish, Arsenal’s Bukayo Saka and Bernd Leno, Craig Dawson of West Ham United, James Maddison and Matheus Pereira.
"The highlight of January? I don't even know," said Gundogan after receiving his award.
"I think it was all the month because we won all the games. It was just the run, you know the feeling that you have inside yourself that you're so strong at the moment as a team, not just yourself, that's just an amazing feeling.
"I had that feeling a few times in the season where we had 100 points, or the season after where we won one point ahead of Liverpool, or when I used to play for Borussia Dortmund.
"You have that feeling sometimes where you just feel so strong and unbeatable. That was the best moment that went all throughout the month."
Gundogan has so far scored nine goals in 17 Premier League games this season.
Gundogan’s manager, Guardiola also won the Premier League’s manager of the month for January after guiding his side to victories in all their games.