Gerrard finalised the deal less than 24 hours after scoring the only goal in Liverpool's 1-0 Carling Cup semi-final first leg victory at Manchester City.
"I'm very happy. It's a very proud day for myself and my family," the 31-year-old told the Reds' official website. "It comes on the back of a fantastic team performance last night when we got the result we were looking for.
"The contract extension coming the day after has been the icing on the cake so it has been a perfect 24 hours."
The new deal, the terms of which have not been revealed, means 2012 has begun well for the Huyton-born midfielder, who has scored in two of his three appearances in the new year.
He admitted he was glad to see the back of 2011 after a groin operation in March curtailed the end of last season and delayed his start to the current campaign.
He had a further two months on the sidelines after an ankle infection in October, but with the club 90 minutes away from their first final in six years - and their first trip to Wembley since 1996 - he now is looking forward to enjoying happier times.
"This is the club I love and is the club I have supported since I was a young boy," he added.
"I am living the dream as the captain of one of the biggest clubs in the world.
"I love coming to work every day and the experiences I have had since I was eight years of age and first signed for the club, I wouldn't change them for the world.
"To extend that and to hopefully have some more good times in a red shirt is what I want.
"There will be more highs and lows, there's no doubt about it as that's part and parcel of being a football player at a top club.
"The important thing is that you react well to the lows and experience more of the highs.
"I'm confident moving forward that the club is going in the right direction.
"We've got a fantastic team, we've got the right owners in place and the right team behind our team, so I'm really confident we'll have more good experiences in the future."
Gerrard is now almost certain to end his career at the club he joined as a schoolboy.
But plans have already been put in place for him to continue beyond his playing days as he has agreed to take up an ambassadorial role at the club once his playing days are over.
"It's really flattering for me that the club have offered me the chance to stay when I eventually hang my boots up," he added.
"Hopefully that will be in many years to come because I want to play for as long as I can.
"I'll know myself when it's time to hang my boots up and then hopefully I can stay involved with the club and set the right example for youngsters coming through."
