“Manchester City can confirm that it has extended Frank Lampard’s contract up to the end of Manchester City’s season, enabling his continued participation in both domestic and European campaigns,” said a statement on the club’s website.
England star Lampard has scored six goals in 17 appearances for City this season after signing on loan from the fledgling MLS club.
The US team said the date he will join them will be revealed “as the Premier League and MLS seasons unfold”.
New York City FC director of football Claudio Reyna said: “Frank is a star and it is no surprise Manchester City is rewarded by his contributions on the field every single day.
“He is eager to get to New York once his commitment ends in England and will be available to play on arrival as a permanent member of the squad, given he will come to us having played at the highest level.”
City manager Manuel Pellegrini recently spoke of his desire to keep the 36-year-old.
“Frank is a top player, he must continue scoring goals, he is great inside the box,” he said.
“We know exactly what we must do. Frank wants to stay, we want to keep him.”