The 34-year-old England midfielder, who broke Bobby Tambling's all-time Chelsea scoring record of 202 goals this month, will remain at Stamford Bridge for a 13th season.
"We have been talking to him since the end of last year and our discussions have been entirely positive throughout. We are delighted we are now announcing an extension to his contract which will keep him at the club until 2014," chief executive Ron Gourlay told the club website.
Lampard said he was delighted: "Everybody knows I always maintained the dream was to stay at Chelsea. We've been talking for ages and even though it went on for quite a period it was always amicable.
"The thought of helping the club to more success in the forthcoming years is all I ever wanted. I couldn't be happier."
Lampard, voted Chelsea's player of the year three times, has made 560 starts for the club and come on 47 times as a substitute, putting him third on the list of appearances.
With his existing contract about to expire, Lampard's future had been the subject of intense media speculation.
