The 48-year-old's previous deal was due to expire at the end of next season, and he attracted interest from other clubs — including Fulham — during the summer. He has now committed his future to Coventry ahead of a season that begins against champions Arsenal on 21 August.
Lampard joined Coventry in November 2024, taking over from Mark Robins when the club sat 17th in the Championship, just two points clear of the relegation zone.
The turnaround since has been remarkable. He won 16 of his remaining 29 Championship matches that first season to finish fifth and reach the play-off semi-finals, where they lost 3-2 on aggregate to Sunderland.
Last season he took them all the way. Coventry won 28 Championship matches — the most in the club's history in any single league season — to claim the title and end a wait for top-flight football that stretched back to 2001.
"After the incredible work of everybody to get promoted and win the Championship, it was important to enjoy the moment, and we certainly did as a city," Lampard said.
"Our job then as staff, and for the players of course, is to firstly recharge but also focus on what we want to do and what we need to for next season.
"There's a lot of work to do on and off the pitch as a football club, so those things have been ongoing.
"I'm looking forward to getting back with the players, to see them all and get ready for the new season."
Lampard began his managerial career at Derby County before two spells at Chelsea and one at Everton.