The deal is reportedly worth just short of ?200,000 per week and it stops interested clubs Man United and PSG pursuing the best left back of his generation.
Chelsea should now concentrate on negotiating a new deal with Frank Lampard, who has arguably been one of the most consistent Premier League players over the past decade.
The fact Lampard has offered to reduce his wage by ?100,000 per week shows the players commitment and loyalty to the club and now its time they show it to him.
The fans have been vocal in supporting Lampard, 34, who scored his ninth goal of the season from the penalty spot against Arsenal on Sunday.
Since his ?11million move from West Ham 12 years ago, Lampard has scored more than 20 goals a season on five occasions. A total of 130 assists and 195 goals have been instrumental in helping Chelsea to success in the Champions League, Premier League, FA Cup and League Cup.
Lampard has earned himself legendary status at Stamford Bridge with his consistent service in a transitional period for Chelsea during the ?Abramovich? revolution.
He has also been an ever-present player in the international fold for England, earning 93 caps since his debut against Belgium in 1999. He has played pivotal roles in four major tournaments and he was the scorer of ?that? goal against Germany in the 2010 World Cup which was not allowed, despite clearly crossing the line.
His passing range, set-pieces and general experience means that surely he would be a good squad player.
With the huge wage cut he is willing to take, Lampard would be good to slot in Chelsea?s midfield when they are struggling with injuries and his experience with the young players would be valuable.
Yes, he is 34, but his performances this season alone show he can still play at this level, just in a slightly deeper role as he can?t cover ground as much as he could previously.
Publicly announcing Lampard won?t be offered a new contract is disrespectful to the player. With negotiations, a deal could suit both parties as Lampard clearly isn?t motivated by money at this stage of his career.
It?s time Abramovich shows some loyalty to his players and reward Lampard with a much deserved contract. If he stays free of injury, he has another couple of seasons in him.