The 32-year-old is set to move on at the end of the season, having spent six years at Liverpool following a £25m move from Southampton in 2014.
Lallana will have the chance of being involved in Liverpool's Premier League title triumph and saying his farewells before the expiration of his contract at the end of July.
“I am really pleased to have the chance to finish this season – it means a lot to me and my family,” Lallana said.
“Now isn't the moment to review my time here because the focus needs to be on the remaining nine matches and the club finishing the season in the best manner possible.
“Of course, one of the big personal positives about committing to this short-term extension is that I will now get to say goodbye to the people who mean so much to me in the right way.
“The gaffer has been different class and we've had an honest conversation about what my role will be in the remaining weeks. I want to contribute in the most positive way possible that helps him and the team, not just for the remaining matches of this season – but also what they'll need to consider for next.
“I'm totally at peace with what that looks and feels like, and I know the role I'll be playing for this team will help in what's going to be an extraordinary period – the likes of which none of us have ever experienced.
“I feel in my time at Liverpool I've always looked to do the right thing for the team, the manager and the club in every decision I've made. I think this one fits into that category as well, so I'm buzzing to be seeing out this campaign and hopefully get to celebrate something memorable with an amazing group of people.”
Jurgen Klopp heaped praise on Lallana, insisting he is a "top-class professional and an even better person.'
“I know how highly sought after Adam is in this moment by other clubs who want him for next season, so for him this is a commitment to us and we are very appreciative to him for it,” Klopp told the official website.
“This is absolutely how it should be, too, because I am so pleased he will be with us to finish the job this season and have the farewell he deserves so much.
“It is not possible for me to find words in the English language to properly explain the importance of Adam Lallana during my period of being manager of this club.
“But, to be honest, now is not the time for these words. Because of this news – that he stays until we finish this campaign – I can say all the things I want and need to when our season is concluding next month.
“What I can say – and want to say – now is even the way he has handled this extension tells you all you need to know about the person and his character. A top-class professional and an even better person.
“Adam always puts the club first – always! In the conversations we have had, he has been the first to express that my priority as a manager needs to be the players who are at this club for longer than just the rest of this season.
“He wants to be here to finish the job and do it properly, but it says everything about him that his biggest concern was blocking the progress and opportunity of a player who is under contract for next season also.
“But his role is too important to lose him before this season is done. So, it's fantastic we can delay our messages of gratitude and good luck until the end of July now.”
With Liverpool requiring just two more wins in their nine remaining games to clinch the Premier League title, it's a fitting farewell for Lallana's six-year spell at Anfield.
The England international has made 178 appearances for the Reds and whilst injuries have largely scuppered him from reaching his best, he is sure to be remembered for his unrelenting work-rate, exceptional attitude, and silky ball control.