The new deal will keep Gerrard at the club until 2013.
Dirk Kuyt also signed a two-year extension on Friday.
Gerrard said: “This news has given me a boost and hopefully it will help us in our remaining games.
“We have got big matches to play, all of them cup finals as we have to win them all to stay in the title race and go all the way to Rome for the Champions League final.”
He added: “It is a fantastic feeling to have agreed the deal. This is what I wanted, to see out the rest of my career with Liverpool.
“I have said all along that as long as the club wanted me then I would stay at Liverpool.
“I have been a fan all my life and it will be fantastic at the end of my career to look back and say I have been with Liverpool all the way through.
“The main priority is to be successful and I want to achieve success at the club I love. If we can win more trophies together then I will be really happy.”
