The 22-year-old defender has committed his future to the Ligue 1 giants having penned a new deal which runs until the summer of 2016.
"He is one of the young players that OL will look to rely on in the future to prolong the new sporting dynamic of the club," read a club statement.
Reds boss Kenny Dalglish is on the lookout for defensive reinforcements to strengthen his squad during the January transfer window.
Liverpool identified Lovren last summer, but after opting instead to sign Sebastian Coates, a move failed to materialise for the Croatian international.
However, the talented stopper has snubbed interest from the Barclays Premier League in favour of staying in France - saying that he is eager to remain at a club playing in the UEFA Champions League.
Liverpool's hopes of finishing in the top-four this season suffered another setback at the weekend after their disappointing 3-1 defeat at the hands of Bolton Wanderers.
Dalglish will be hoping his side can bounce back, as he bids to return the Reds to Europe next year.