Liverpool have not officially disclosed the length of the new contract for the 33-year-old, but it is reported to be for two years.
Gerrard told the club's official website: "I think everyone knows what it means to me. I've been here that long and so to extend, it's a big day for me and I'm really happy for myself and my family. It's great news.
"It lets me know the club thinks an awful lot of me and want me here. I'm glad it's all done and it's happened at the right time before the season, so I can just focus on playing as well as I can."
Gerrard's existing contract was due to expire in 2014 but after starting 36 Premier League games last season the club were understandably keen to secure the future of one of their greatest ever players.
The England captain made his debut for Liverpool in November 1998 and has made 630 appearances for the Reds.
Managing director Ian Ayre added: "It's fantastic for everyone - the club, Steven and the fans.
"He is - and always has been - such a big part of Liverpool Football Club. Particularly in this day and age, it's rather unique to find a local player who has given his whole career to his club.
"We're pleased today to add an extension to his existing agreement and that keeps him here until the end of his career.
"We've said what we'll do in two years' time is review it again and see how happy Steven is. We seem to always be happy with him, so hopefully we'll just continue in that vein."