The centre-half has agreed a new four year deal – with an option of an additional year to 2022 – worth almost £100,000 a week.
The 27-year-old had two years left to run on his current agreement, but talks had stalled earlier in the year when his representatives couldn’t agree terms.
Negotiations were resurrected last month though, with manager Jurgen Klopp determined to sign the defender as a long term foundation for his team building plans.
The news may surprise a few Reds fans, with calls for Liverpool to spend big in the summer on a centre half to address the continuing defensive problems Liverpool have suffered this season.
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Lovren had the finger pointed at him for both goals in the Anfield defeat by Crystal Palace last weekend, but the German coach has reiterated his faith in the Croatian, who he described as world class after a magnificent performance against Everton in the Mersey derby.
Liverpool paid £20m to sign the defender from Southampton in 2014, and after a tough start for his new club, he has bedded in well in the past year under Klopp.
And speaking as talks were ongoing, he had explained earlier this month he is happy at Anfield and determined to stay in the long term.
“Like I’ve said many times about my future, I’m really happy here. I’m settled after everything that happened in the beginning,” he said.
“I just want to improve every day here, show my quality and give my best for the club.”
His nightmare against Palace aside, the one fear Reds fans have about Lovren is his injury record, with the defender missing the whole of February and March with a knee problem.
Since arriving at Anfield he has suffered eight separate injuries which have kept him out for lengthy spells, but Klopp is convinced he can provide the backbone for the club over the coming years.
The Liverpool manager may also feel that he needs to act to secure his most experienced defender, as he continues with plans to sell Mamadou Sakho in the summer.
There were fears the Frenchman had suffered cruciate ligament damage and could be sidelined for a year after injuring his knee playing for loan club Palace, but scans have confirmed he has merely strained the ligaments, which means he can be sold at the end of the season.